What each input means, how to answer it honestly, and why it matters to the determination. Fields appear in the order they appear in the form.
What it is
The number of years you have worked directly in the industry of the business you're acquiring. Years actually spent in the operational reality of this kind of business — same customer base, same operating rhythm, same vendor relationships.
How to answer honestly
Count years of direct operational involvement, not adjacent exposure. Reading about the industry, consulting to it from the outside, or covering it as an investor does not count. Time in a closely-related industry counts only if the operational specifics transfer — and most of the time they don't transfer as cleanly as expected.
Why it matters
The first 18 to 24 months after close are the steepest part of the operator learning curve. Industry depth is what shortens that curve. The system reads this against the operational complexity of the business to determine whether your context covers what the business will demand of you.
What it is
Whether you are acquiring complete ownership of the business or a partial stake with the seller (or other parties) retaining ownership.
How to answer honestly
Complete change means you own 100% at close. Partial change means the seller, an investor, or another party retains an ownership stake post-close. If the seller note is structured as equity that converts later, that's still partial change for the purposes of this question.
Why it matters
Partial change introduces ongoing decision-sharing with someone whose interests are no longer fully aligned with yours. Complete change concentrates decision authority in your hands and the obligations that come with it. The structures fail differently and the system reasons differently against each.
What it is
The total number of months you have been actively searching for an acquisition target — from the time you began evaluating opportunities to today.
How to answer honestly
Count from when you committed full attention to the search, not from when the idea first occurred to you. Pauses or breaks count if the search was nominally active but practically stalled. The honest figure is usually a month or two longer than the comfortable answer.
Why it matters
Search duration is one component of acquirer-state evaluation. Operators who have been searching a long time without closing make different decisions than operators earlier in the funnel — the alternative becomes harder to imagine, and that shapes what gets accepted.
What it is
The number of months that have passed since you signed the letter of intent on this specific deal.
How to answer honestly
Count from LOI signature to today, not from when negotiations began. If the LOI has been amended or extended, count from the original signature date.
Why it matters
Extended time on a single LOI is a documented signal of a deal that has stretched past its natural close. Sunk-cost effects shape the next decisions — both for you and for the seller. The system reads this together with other timeline signals to evaluate decision-making conditions.
What it is
The number of months you can sustain your current standard of living from accessible reserves, without taking on the acquired business and without new external income.
How to answer honestly
Sum the cash and short-term reserves you would actually draw on. Divide by your real monthly burn under ordinary conditions — not an artificially low recent month. Don't include retirement accounts you wouldn't actually liquidate or the equity injection you've earmarked for the deal.
Why it matters
Runway depletion is the single largest predictor of decision compromise. When time becomes the constraint, what you'll accept changes — even when you don't notice it changing.
What it is
The amortization period in years for the SBA loan financing the acquisition. The term over which the principal and interest are scheduled to be repaid.
How to answer honestly
From your commitment letter or term sheet. SBA 7(a) acquisition loans typically run 10 years for goodwill-heavy deals and longer where real estate is included.
Why it matters
Loan term determines the annual debt service load against your projected cash flow. Shorter terms concentrate the debt burden into fewer years; longer terms spread it but extend exposure. The system reads this together with debt service magnitude and cash flow trajectory.
What it is
Trailing twelve-month revenue of the business you're acquiring — total top-line revenue across the most recent twelve months ending in the most recent reporting period.
How to answer honestly
Use the figure from verified financials, not the seller's stated number. If a quality of earnings has been performed, use that figure. Revenue here means recognized revenue under standard accounting, not bookings or pipeline.
Why it matters
Revenue is the foundation for nearly every downstream calculation — debt service coverage, customer concentration in dollars, working capital requirements, growth implications. Inaccuracy here propagates through the entire determination.
What it is
Trailing twelve-month earnings before interest, taxes, depreciation, and amortization. The cash earnings the business generates from operations.
How to answer honestly
Use verified EBITDA — the figure that reconciles against the business's tax returns and bank statements, not the figure produced by adding back every owner discretionary expense the seller proposes. The honest EBITDA is usually meaningfully lower than the seller's marketed EBITDA.
Why it matters
EBITDA drives debt service coverage, valuation multiple, and stress projections. The system applies a documented first-year operational shortfall to your stated EBITDA and tests whether the deal still works under that stress. Overstated EBITDA produces a false sense of safety the system can only correct if the EBITDA you enter is honest.
What it is
Trailing twelve-month direct costs of producing the goods or delivering the services the business sells. Materials, direct labor, and other variable costs tied to revenue production.
How to answer honestly
From verified financials. For service businesses, COGS typically includes direct labor for the people performing the service. For product businesses, it includes materials and direct production. If the seller's chart of accounts treats some direct costs as operating expenses, restate them as COGS for this question.
Why it matters
The system derives gross margin from revenue and COGS. Gross margin is one of the documented vulnerability dimensions — businesses with thin gross margins have less buffer against pricing pressure or input cost shifts.
What it is
The percentage of revenue that comes from contracted, repeat, or otherwise predictable sources — as distinct from one-time transactions or new customer acquisition.
How to answer honestly
Recurring means contractual continuation: subscription revenue, service contracts with multi-year terms, retained relationships with documented renewal patterns. Repeat customers without contracts are not recurring — they are repeat. If you haven't sampled the actual contracts to verify the recurring claim, the figure is closer to a seller representation than a fact.
Why it matters
High recurring revenue is one of the strongest signals of a defensible business — but only if it's actually contracted. The system tests for the case where recurring is claimed but not verified, because unverified recurring revenue is the single most common overstatement in acquisition diligence.
What it is
Whether the business requires substantial physical assets — equipment, inventory, property — to operate, or runs primarily on people and intangibles.
How to answer honestly
Light: software, services, light professional businesses. Moderate: light manufacturing, distribution with modest inventory. Heavy: manufacturing with substantial equipment, businesses with large inventory, businesses tied to specialized facilities. If maintenance capex regularly exceeds 5% of revenue, the business is heavy.
Why it matters
Asset intensity drives ongoing capex requirements, which compete with debt service for the same cash. Heavy businesses have less flexibility when cash gets tight because the assets need maintenance regardless of revenue.
What it is
The annual rate at which the broader industry the business operates in is growing — measured at the industry level, not at this specific company's level.
How to answer honestly
Use industry data from a credible source — IBISWorld, government statistics, trade association reports. Don't substitute the business's own growth rate for the industry's; they often diverge meaningfully and the divergence is itself information.
Why it matters
Industry growth determines the cash requirements of growing into the trajectory you're buying. High growth pulls more cash into working capital ahead of when it produces revenue — the documented growth-cash trap. Low or negative industry growth is a documented Kessler theme in failed acquisitions.
What it is
How operationally complex the business is to run day-to-day. Reflects the number of distinct processes, vendors, regulatory touch points, and judgment calls the operator faces in normal operations.
How to answer honestly
Simple: one product or service line, few vendors, predictable rhythm. Moderate: multiple service lines, modest vendor count, normal regulatory exposure. Complex: many moving parts, significant vendor management, meaningful regulatory or compliance load. Specialized: requires domain expertise that took the seller years to develop.
Why it matters
Complexity sets the bar for what your operator capacity needs to clear. The system reads this together with your industry experience and support infrastructure to determine whether you're equipped for what the business will demand.
What it is
The direction of revenue over the most recent three months — growing, flat, or declining relative to the prior comparable period.
How to answer honestly
Compare the most recent three months against the same three months from the prior year (to control for seasonality). A modest seasonal variation is flat; a sustained directional move is growing or declining. The honest answer here is more important than it feels — late-stage trajectory often signals what the trailing twelve months don't.
Why it matters
You inherit the trajectory you buy into, not the trailing twelve-month average. Declining trajectory means the typical first-year stress lands on top of an already-weakening business. The system widens its stress projections accordingly.
What it is
The total enterprise value being paid for the business — the negotiated purchase price as agreed in the LOI or definitive agreement.
How to answer honestly
Total consideration including cash at close, seller note, earnout, and any equity rollover. Not just the cash portion. If the deal includes contingent payments, use the expected value of those payments under base-case execution.
Why it matters
Purchase price relative to EBITDA gives the multiple — the central valuation signal. The system reads it together with operator profile to test whether the price assumes performance you're equipped to deliver.
What it is
The total annual principal and interest payment on the SBA loan plus any seller note that is not on full standby. The cash that leaves the business each year to service acquisition debt.
How to answer honestly
From your commitment letter and seller note terms. If the seller note is on full standby (no payments during a defined period), exclude it for that period. If it requires payments, include them. The figure is annualized — sum of twelve months of debt service.
Why it matters
Debt service is the fixed obligation against which everything else gets stress-tested. The system computes coverage ratios under documented stress scenarios and tests whether the deal holds.
What it is
The W-2 salary you intend to pay yourself from the business as the operator post-close.
How to answer honestly
The figure that covers your actual cost of living plus tax obligations. Don't pick an artificially low number to make the deal look better on paper — SBA underwriting expects market-rate operator compensation, and a salary that doesn't match your real burn creates downstream stress when the personal runway runs out.
Why it matters
Owner salary is subtracted from EBITDA before debt service coverage is computed. Setting it at the right level protects you personally; setting it artificially low produces deal economics that don't survive contact with reality.
What it is
Capital expenditure planned for the first twelve months post-close — equipment, vehicles, facility improvements, IT systems, and any other capital assets the business needs.
How to answer honestly
Maintenance capex (replacing what wears out) plus any planned capital investment in year one. If the seller has been deferring capex to make the business look more attractive, your year-one figure should reflect catching up.
Why it matters
Capex competes with debt service for the same cash. Year-one capex is part of the cash flow projection the system uses to test whether the deal holds under stress.
What it is
The number of days between when the business pays for inputs (inventory, payroll, materials) and when it collects cash from customers. The structural lag in the operating cycle.
How to answer honestly
Service businesses with fast invoicing typically run 15 to 30 days. Light manufacturing runs 30 to 60. Distribution and inventory-heavy businesses run 60 to 120. If you don't know, ask the seller's accountant — this number is in the financial statements but isn't always extracted.
Why it matters
The conversion cycle structurally ties up cash that would otherwise be available to absorb shocks. A business with $600K of reserves and a 90-day cycle on $8M of revenue has substantially less cash actually available than the headline reserves number suggests. The system reads this into reserves adequacy directly.
What it is
Whether revenue is distributed evenly across the year or concentrates in particular months or quarters.
How to answer honestly
Flat: revenue is roughly even month-to-month. Q4 concentrated: meaningful peak in October through December (retail, gift, holiday). Summer concentrated: peak in May through August (landscaping, recreation, construction). Winter concentrated: peak in November through February (heating, snow services, indoor seasonal). Choose the pattern that best describes the business; if seasonality is mild, choose flat.
Why it matters
Whether the trough months coincide with year-one cash demands matters. Debt service hitting in a low-revenue month creates different stress than debt service hitting in a peak month, and the system reads this into the cash projection.
What it is
The largest single customer's share of trailing twelve-month revenue, as a percentage.
How to answer honestly
If the same parent company has multiple billing entities, treat them as one customer. If the business has a clear "top customer" that operationally everyone refers to as such, use that figure. The honest number is the share that a single decision (their decision to leave, change terms, or renegotiate) would remove from revenue.
Why it matters
Customer concentration converts a single relationship into a structural failure point. The system reads this together with verification status, contractual protection, and seller transition adequacy to evaluate the relationship's resilience through change of ownership.
What it is
The state of your direct verification with the top customer about whether they will continue the relationship through the change of ownership.
How to answer honestly
Confirmed: you spoke with the customer directly and they confirmed continuation. Hedged: you spoke with them and they were non-committal. Refused access: the seller did not allow direct contact. Not attempted: no direct conversation has occurred. No concentration: top customer is below 15% of revenue and the question doesn't apply.
Why it matters
The largest documented diligence gap in acquisitions is the failure to verify customer continuation directly. The system treats verified customer relationships substantially differently from unverified ones, and the difference often determines the verdict on deals with concentration.
What it is
Whether the business's revenue dropped by 25% or more in the 30 days immediately before close, compared to its trailing average.
How to answer honestly
Compare the most recent 30 days of revenue against the average of the prior 30-day periods. If the drop is 25% or more, the answer is yes regardless of the explanation offered. The fact of the drop is what matters here, not whether the seller has a story for it.
Why it matters
A late-stage revenue drop of this magnitude is the single most reliable surfacing of an undisclosed problem the buyer would otherwise inherit. The practitioner literature treats this as a walk-away condition.
What it is
The cash position the business will have at close — the operating cash that remains after the closing transaction is complete and before the business begins generating its first month of post-close cash.
How to answer honestly
Cash that will be in the operating accounts at close, available for normal operations. If part of your equity injection is being used to fund a working capital cushion, include that. If the seller is taking cash off the balance sheet at close, exclude it.
Why it matters
Reserves are what the business has to absorb a first-year shock. The system reads this against monthly operating expenses, working capital tied up in the operating cycle, and one-time transition costs to determine the cash actually available for absorbing shocks — which is often substantially less than the headline reserves figure.
What it is
Non-recurring expenses you expect to incur in the first six months post-close — rebrand, IT migration, legal cleanup, severance, lease deposits, signage, system changes.
How to answer honestly
Add up the specific items you've identified plus a buffer for the unanticipated. Most acquirers underestimate this number. If you're entering zero, that's only honest if you genuinely have no transition spend planned — and most acquisitions have at least some.
Why it matters
Transition costs land in the first six months when the new owner has the least operational rhythm to absorb them. They directly reduce the cash the business has available for its own first year, and the system reads this into reserves adequacy.
What it is
The state of your arrangements with the employees who are operationally critical to the business — the people who would substantially harm operations if they left.
How to answer honestly
Identified and contracted: key employees named, retention bonus or stay agreement signed. Identified and signaled: key employees named and have expressed intent to stay, but no formal agreement. Identified, not signaled: key employees named but retention not confirmed. None identified: no single critical employee — the business runs without dependence on specific individuals.
Why it matters
Key employees are the operating glue that distributes dependency away from the seller. When they're not identified or not retained, the operating knowledge sits with the seller — and the seller is leaving. The system reads this directly into the owner-dependency calculation.
What it is
The number of months of contractual seller involvement you've negotiated to remain after close — for transition, knowledge transfer, or active consulting.
How to answer honestly
From your purchase agreement or LOI. Count only contractually committed months — informal "the seller said he'd help out" doesn't count. If the structure includes a base period plus an extension option, use the base period.
Why it matters
Seller transition is what allows customer and employee relationships to anchor on you rather than depart with the seller. Six months covers introductions but not transfer; twelve months is where relationships actually root with the new owner. The system reads this together with the seller's post-close role to evaluate transition adequacy.
What it is
The operational shape of the seller's involvement during the transition period — fully active in operations, board-level only, or no continuing involvement.
How to answer honestly
Active consultant: the seller will be present in operations, available daily, working alongside you. Board only: the seller will provide strategic guidance but isn't in day-to-day operations. None: the seller leaves at close. Active is what carries the relationship transfer; board-only or none means transition months are mostly ceremonial.
Why it matters
Transition months matter only if the seller is actually present during them. The system reads role and length together — twelve months of board-only involvement is structurally different from twelve months of active consulting.
What it is
The outcome of independent verification of the business's stated earnings — typically through a quality of earnings engagement, accountant review, or other third-party reconciliation against tax returns and bank statements.
How to answer honestly
Reconciled: independent verification was performed and the figures matched within an acceptable margin. Partial: some verification was performed but not comprehensive. Failed: verification was attempted and the figures did not reconcile. Not attempted: no independent earnings verification has occurred.
Why it matters
Earnings verification is the foundation of every economic reasoning step downstream. Without it, the system is reasoning against stated rather than verified figures, and the documented largest source of late-stage acquisition failure remains in front of you.
What it is
The pattern of disclosure quality you've observed from the seller throughout diligence — how completely and consistently they have answered your questions and produced requested materials.
How to answer honestly
Consistent: complete answers, materials produced as requested, no significant gaps. Gaps: answers have material gaps that haven't been filled, or materials have been delayed without clear reason. Evasive: incomplete answers, deflection on specific questions, materials produced inconsistently. The honest answer is usually closer to the harsher end than feels comfortable to admit.
Why it matters
An evasive seller during diligence will not become transparent after close. The post-close information environment will resemble the pre-close one. The system reads this as a signal about the trustworthiness of every other figure the seller has provided.
What it is
The level of operational P&L responsibility you have held before this acquisition — owning the cash, customer, and payroll cycle of a business or business unit.
How to answer honestly
Full P&L: you have run a complete business with full responsibility for revenue, costs, and cash. Division: you have run a division or major business unit with P&L responsibility. Sub-unit: you have managed a department or function with budget responsibility but not full P&L. None: you have not held P&L responsibility. Investment management or advisory experience is not P&L ownership.
Why it matters
P&L experience is the muscle memory for the cash-customer-payroll cycle. Without it, that cycle is genuinely new — and the first 18 to 24 months are the steepest learning curve of an operator's career. The system reads this together with industry experience and support infrastructure.
What it is
The structural support you have engaged for the post-close period — the experienced operator or advisor relationships you can rely on for the decisions where your own judgment is still developing.
How to answer honestly
Paid advisor or mentor: a retained relationship with someone experienced in this kind of operation. Structured program: an organized search fund accelerator or operator program with scheduled access to experienced operators. Informal peer network: occasional access to peers but no structured engagement. None: no significant support relationships in place.
Why it matters
Support infrastructure is what carries operators through the period when their own context is still developing. The documented difference between operators with structured support and those without is one of the largest predictors of post-close outcome.
What it is
The personal financial reserves you maintain outside the acquired business — cash and accessible reserves that are not committed to the business and would not be touched even in the business's worst year.
How to answer honestly
Six plus months: you have personal reserves that cover six months or more of your living expenses, separate from the business. Three to six months: personal reserves cover roughly a quarter to half a year. Less than three months: personal reserves are thin. None: you are personally dependent on the business from the first month.
Why it matters
Personal liquidity outside the business is what allows you to make sound operational decisions during a tight period. When personal cash runs out, business decisions get distorted by the operator's personal financial pressure. The system reads this together with runway as part of acquirer-state evaluation.
What it is
The state of a working capital line of credit established for the business — a revolving credit facility separate from the acquisition loan, used to bridge cash flow gaps during the operating cycle.
How to answer honestly
Yes drawn: line is established and currently drawn. Yes committed: line is committed by the lender and available to draw, but not drawn. In progress: discussions or applications are underway but the line is not yet committed. No: no working capital line is in place or planned.
Why it matters
A working capital line is the documented mechanism for absorbing first-year cash flow stress. Many deals that would otherwise fail under stress hold up because the line provides a bridge. Committed or drawn is structurally different from "in progress" — and the system treats them differently.
What it is
The contractual protection you have against customer departures triggered specifically by the change of ownership — clauses in customer contracts that obligate continuation through the transition.
How to answer honestly
All top 5 customers: contractual change-of-control protection is in place across the top five customers. Partial top customer only: protection is in place for the top customer but not the others. None: no contractual change-of-control protection in place.
Why it matters
Change-of-control protection removes the legal exit pathway customers have when ownership changes. It does not guarantee the relationship survives operationally, but it removes one major mechanism by which concentrated relationships break at change of ownership.