The most dangerous moment in your entire exit is not when a buyer finds a problem. It is when they hand you a number that makes you stop thinking clearly. You spent 20, 30, 40, 50 years building something. Somebody hands you a letter of intent that could change your life — and your brain immediately goes from “we are at work today” to “six months from now I could be living the beach lifestyle.” That is the moment when most sellers make decisions they regret.
LEAD stands for Leverage, Economics alignment, and Deal structure. It is a standalone 40-point tool inside the Exit Ratio 360™ that shows up when a deal materializes — not when you are preparing, but when an offer is put on the table. It flips the lens. Instead of asking whether the number is high enough, you are scoring the deal the same way buyers score your business. Scott’s book is available on Amazon.
The LOI Smackdown — What It Is and How to Avoid It
The LOI Smackdown is this: you have a $20 million company doing $5 million in EBITDA. A buyer comes in and offers six times — $30 million. You are excited. The number looks fantastic. Then due diligence starts. Over the next 90 days they find issues, reclassify add-backs, compress the multiple, and by the time final paperwork is drafted the deal is at $22 million with an earn-out and an 18-month transition requirement. The offer that looked best on a napkin cost you the most on a spreadsheet.
The LEAD model asks you to score the deal before you react to the number. Buyer quality — have they closed deals in your sector? Do they know your industry? Are you a platform company or a tuck-in for them? Deal structure — what is the mix of cash at close versus earn-out versus seller financing? Terms — what are the holdback provisions, the transition requirements, the non-compete length? Leverage — how much of your documented seller’s thesis can you use in the negotiation?
Build Your Sell Criteria Before the LOI Arrives
Buyers have acquisition criteria before they approach you. You should have sell criteria before they arrive. What is your minimum cash at close? What is your maximum acceptable transition period? What earn-out terms will you accept and which are dealbreakers? What is your walkaway number? When an LOI arrives you score it against criteria you defined in a clear head — not criteria you are inventing in the excitement of a large number.
Real example: someone sold their business, accepted an earn-out, agreed to stick around 12 months. A pile of money was in the bank. But they had to report to their old number two every day — someone they had never answered to in 30 years of running the business. If you want the Barefoot lifestyle — walking out the moment the deal closes — build that into your deal structure criteria now, before the number arrives and changes how you think.
What is the LEAD model in the Exit Ratio 360?
The LEAD model is a standalone 40-point deal evaluation tool inside the Exit Ratio 360 that activates when an offer materializes. LEAD stands for Leverage, Economics alignment, and Deal structure. It scores the buyer quality, deal structure, terms, and your leverage — so you evaluate deals rationally rather than emotionally at the highest-stakes moment of your professional life.
What is the LOI Smackdown and how does the LEAD model prevent it?
The LOI Smackdown is when a buyer opens with an attractive headline number then systematically reduces the effective price through due diligence findings, add-back reclassification, earn-out provisions, and deal structure changes. The LEAD model prevents this by giving you a scoring framework to evaluate the full deal structure before you react to the number.
What is the difference between a platform deal and a tuck-in deal?
A platform company is acquired as the foundation for building a larger business — it receives resources, investment, and a premium multiple. A tuck-in is acquired to be folded into an existing platform and typically receives a lower multiple. Knowing whether you are positioned as a platform or tuck-in before the conversation starts determines what multiple you can credibly ask for.
What is economics alignment in the LEAD model?
Economics alignment asks whether the buyer’s financial model for your business matches your expectations. This includes the multiple they are using, how they are treating your EBITDA, which add-backs they are accepting, and what post-close performance assumptions they are making. Misaligned economics is the primary source of LOI Smackdowns — the buyer’s model and the seller’s expectations are never reconciled before the LOI is signed.
How do earn-outs affect the LEAD score?
Earn-outs transfer risk from buyer to seller — you only receive the full purchase price if the business hits specific metrics after you no longer fully control it. The LEAD model scores earn-out provisions by asking: are the targets achievable under the new ownership structure? Are the measurement criteria clearly defined? Is the earn-out period acceptable given what you want your post-close life to look like?
What is leverage in the LEAD model?
Leverage is the documented evidence from your seller’s thesis and Titan’s thesis that allows you to negotiate from strength. The more documented proof you have of financial performance, operational depth, leadership quality, and competitive position — the more leverage you carry into the deal conversation. An owner with a high Exit Ratio 360 score and a documented Titan’s thesis has significantly more leverage than one with a verbal argument and no documentation.
What is buyer quality and how do you score it?
Buyer quality evaluates whether this specific buyer is capable of closing the deal, has experience in your sector, can fund the transaction without contingencies, and has a thesis that makes your business a logical target. A high-quality buyer has closed comparable deals, knows your industry, understands your customers, and is buying for strategic reasons. Low-quality buyers signal higher transaction risk regardless of the headline number.
What should my sell criteria include before going to market?
Your sell criteria should specify: minimum cash at close as a percentage of total deal value, maximum acceptable transition period, earn-out terms you will and will not accept, non-compete restrictions that are acceptable, post-close employment arrangements, and deal structure minimums that would cause you to walk away. Build these criteria in a calm head before the excitement of a real offer makes clear thinking difficult.
What is the Titan’s thesis and how does it affect LEAD negotiations?
The Titan’s thesis is a documented argument that your business is an A-plus level company — one of the best in your market — with proof to support it. In the LEAD model it becomes the leverage input for deal scoring. A strong Titan’s thesis gives you documented evidence to support your asking multiple when buyers push back, and it lets you credibly reject offers that do not reflect the quality of what you have built.
How does the LEAD model connect to the seller’s thesis?
The seller’s thesis is the documented evidence of your business’s value that you bring to the negotiation table. The LEAD model uses your thesis as the leverage input in deal scoring. Your thesis is the argument — the LEAD model is the scorecard for evaluating whether the deal being offered respects it. Used together, they give you an objective framework for accepting, countering, or walking away from any offer.
About Scott Sylvan Bell
Scott Sylvan Bell is a mid-market exit strategy consultant and the creator of the Exit Ratio 360™ — the only 360-point business evaluation system built specifically for owners of $10M to $250M companies preparing for a sale. His book Exit Ratio 360™ is available on Amazon — learn more at scottsylvanbell.com/why-scott/.
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Full Episode Transcript
Aloha and welcome to episode number 39 — the LEAD model, evaluating the deal that is right in front of you. We are in the Exit Ratio 360 system.
The most dangerous moment in your entire exit is not when a buyer finds a problem, a ding, a dent, an issue. It is when they hand you a number that makes you stop thinking clearly. LEAD stands for Leverage, Economics alignment, and Deal structure. Deal evaluation is not a gut call — it is a 40-point structured assessment of the buyer, the structure, the terms, and your leverage. The offer that looks best on a napkin is often the offer that costs you the most on a spreadsheet.
Most sellers do not realize the buyer has a formula to evaluate them — but why don’t you have one to look at the deal in front of you? The LEAD model flips the lens. Instead of sitting across the table asking is the number high enough, you are scoring the deal the same way they are scoring your business. They come to you and say: here is an offer, we think it is competitive. And you say: I have taken a look at my company and we are not even close — or you are almost there — or sounds good, because the number is not the only input.
The LOI Smackdown: you have a $20 million company doing $5 million in EBITDA. They offer six times — $30 million. Sounds fantastic. Then due diligence starts and over 90 days the deal gets restructured to $22 million with an earn-out and an 18-month transition. The offer that looked great cost you the most in the end.
Buyers have acquisition criteria. You should absolutely have sell criteria. If an LOI landed on your desk tomorrow, you should have a framework for evaluating it beyond the number. Your four dimensions, 10 points each: what am I going to get paid in cash at exit? What is my walkaway criteria? Who is my advisory team? And what is my transition period after the deal closes? When you are prepared to answer these questions, it makes it easier to grade a deal.
Real example: someone sold their business, accepted an earn-out, agreed to a 12-month transition. A pile of money in the bank — we are talking a real pile of money. And they told me: Scott, I have got all this money and I have to go to the office every day and answer to my old number two. I like them, but I have to answer to someone, and I have never had to answer to anybody for 30 or 40 years of my life. If you want the Barefoot lifestyle — walking out the moment the deal closes — build that into your deal structure criteria now, before the number arrives and changes how you think.
In negotiation, it is you against you first — and then you against everybody else second. Make your decisions now. What does your deal look like? Aloha and Mahalo.