Before you sign a letter of intent (LOI), spend 30–60 minutes on a CBV/CFO screen. It’s a small step that routinely saves buyers and sellers thousands in avoidable costs and weeks of friction. The goal is simple: make sure price and terms match risk—before momentum locks in.
Where deals leak money
• Working capital peg: Many deals miss the right peg, leading to surprise true-ups at close. We check seasonality and throughput so the peg reflects reality.
• Earnout math: Earnouts you can’t collect aren’t protection; they’re future conflict. We sanity-check metric definitions and timing so targets are measurable and fair.
• Customer durability: Renewal cadence, price floors/ceilings, termination terms—these drive the multiple more than you think.
• OpCo/PropCo traps: Treating integral, special-use property as “redundant” and charging market rent can double-count risk (rent plus capex/downtime). We model integral vs redundant to show the difference.
The Pre-LOI quick checks
- Price realism: A Possible Value band based on the story and the data quality.
- Terms aligned to risk: Where to use holdbacks/escrows, WC true-ups, and specific reps/indemnities.
- Diligence priorities: A one-page list of the three items that actually change price/terms.
What you send
Revenue, EBITDA, top three risks, and whether real estate is included. If inventory is “extra,” note the amount and whether it’s at cost.
Why this pays
One hour now beats six weeks later. Buyers avoid retrade pain and structure misfires. Sellers strengthen the price story with facts that close gaps early. Both sides keep legal and diligence hours focused on the few items that matter.
OpCo/PropCo example
If the plant is special-use (power, clear height, crane rails, zoning), internal market rent plus plant capex/downtime is a double-count. In those cases, model property as integral inside the OpCo and cross-check implied real estate value outside the rent line.
Bottom line
Price is only one lever. Terms, durability, and property treatment often drive more value than haggling over another 0.5x. A short Pre-LOI screen keeps you from stepping on the common landmines.
Call to action:
Email sanjay@sankulinc.com with subject “DEAL” for my one-page Pre-LOI Value & Terms Screen.
About Sanjay: Sanjay Kulkarni, CBV, CFA, CPA (CA-I), C.Dir, is a Toronto-based Chartered Business Valuator and Fractional CFO with 25+ years of experience helping privately owned businesses, PE/VC, and family-law matters across Canada. Email: sanjay@sankulinc.com · Sites: SankulInc.com | BusinessValueGrowth.com
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