Ask for a screening

Small deals, checked properly.

I write short cards for people buying small businesses. One card, one idea, one lesson. I take the numbers in a broker pitch and set them out the way a buyer should see them, in plain English.

2 cards a week - 2-3 minutes each - no long reads
+$212Kclaimed addbacks
One Term Plain English Card 01 - 2 min read

What is an addback, really?

The pitch

A business is listed at $640K of "adjusted EBITDA." The tax returns show $428K of profit. The $212K gap is addbacks - expenses the seller adds back, claiming you, the buyer, would never have to pay them.

What it actually is

An addback is an argument, not a fact. The seller is saying: this cost belongs to my life, not to the business. Sometimes that is true - a one-off lawsuit, the owner's personal truck. Sometimes it is the business quietly paying for itself and calling it optional.

The three questions
  • Does it repeat? A "one-time" cost that shows up three years in a row is a running cost.
  • Is it documented? If it is not in the books or on a receipt, it is a story.
  • Would you pay to replace it? If the owner's "free" labor needs a $90K manager, the addback runs the other way.
The lesson Every addback is a price increase wearing a costume. At a 3x multiple, each $10K of addback you accept is $30K more on the price.
What a screening catches I sort every addback into solid, soft, or seller story - and reprice the deal at the number that survives, before you spend on diligence.

Your turn: what is the boldest addback you have seen in a listing?

Pattern piece - numbers illustrative Subscribe on Substack
5 pagesvs 100+ pages
One Term Plain English Card 02 - 2 min read

Quality of earnings vs a screening

The confusion

Buyers hear "get a quality of earnings report" and assume it is step one. It is not. It is the deep dive - and deep dives are expensive, slow, and wasted on deals that should have died in week one.

A quality of earnings (QoE) report

Done after you are under LOI. Takes weeks and costs real money. Rebuilds the financials from the trial balance up, proves the earnings, and sets the working capital target. It answers: is every dollar of this profit real?

A screening

Done before the LOI, from the CIM and financials you already have. Takes days, not weeks. Ranks the red flags by what they do to the price and gives a straight opinion: pursue, pursue at a lower price, or walk. It answers: is this deal worth another hour of your life?

The lesson A searcher might look at 100 deals to buy one. You cannot run a QoE on 100 deals. Screening is how you pick the one that deserves it.
What a screening catches The deal-killers a QoE would find in week six - found in week one, while walking away is still free.

Your turn: how many deals did you look at before your first LOI?

Pattern piece Subscribe on Substack
5usual suspects
Addback or Seller Story Card 03 - 3 min read

The 5 addbacks sellers always try

The pattern

I read a lot of small-deal listings, and the same five addbacks keep showing up, in the same order, like a set list. None is automatically fake. All five deserve the same question: prove it.

  • Owner's salary above market - sometimes real, once you price the replacement hire.
  • "One-time" professional fees - legal and accounting bills that somehow arrive every year.
  • The owner's car, travel, and meals - real only if the business truly never uses them.
  • Rent paid to the owner's own entity - above-market rent is an addback; the market part is not.
  • A "bad year" adjustment - last year's dip blamed on a one-off that has a cousin in every prior year.
Guess first

Which of the five most often turns out to be a seller story?

The "one-time" fees. Cars and salaries are easy to check against the market. A fee labeled one-time needs the prior two years of invoices to disprove - and when those show the same fee, the addback dies and takes the seller's credibility with it.

The lesson Do not argue about whether an addback is "allowed." Ask for the document. Real addbacks have paperwork; seller stories have adjectives.
What a screening catches Three years of addbacks side by side. Anything labeled one-time that appears twice gets flagged and priced out.

Your turn: which of the five shows up most in your market?

Pattern piece - from recurring listing patterns Subscribe on Substack
$96Kthree addbacks, one owner
Addback or Seller Story Card 04 - 3 min read

The owner's car, rent, and salary

The setup

A composite from deals that cross my desk every month: the owner adds back $96K - a car, above-market rent to his own property company, and the part of his salary he calls excess. All three get the same treatment: a market test.

The car - $18K a year

Partly solid. The truck is personal and the business runs its own vans. But the owner also uses it for site visits, so a few thousand stays in the business as a real cost.

The salary - $40K claimed

The soft one. The owner pays himself $60K and works 50 hours a week. A replacement manager costs $95K. Priced honestly, this addback is not $40K - it is negative.

Guess first

Rent is $9,000 a month to the owner's own entity. Comparable space nearby rents for $6,500. What is the real addback?

$2,500 a month - the excess only. You still need a roof after closing, so market rent is a real cost of the business. Only the markup the owner pays himself comes back. And check the lease: if $9,000 is locked in for five years, even the excess is not yours to add back until it expires.

The lesson Owner addbacks are not yes or no. Each one has a market price, and the addback is only ever the gap between what is paid and what the market would charge.
What a screening catches Each owner addback repriced at market - including the salary that goes negative once you price the replacement hire.

Your turn: in your deals, which of the three is hardest to verify?

Composite - numbers illustrative Subscribe on Substack
+/-$150Kprice swing after signing
One Term Plain English Card 05 - 2 min read

Working capital: the number that moves price after closing

The term

Working capital is the money a business needs in the tank to run day to day: inventory on the shelves, plus what customers owe, minus what the business owes suppliers. Buy the business and that tank has to come with it, at an agreed level - the "peg."

Where the money moves

Agree a price, set the peg at the normal level, and then count what is actually delivered on closing day. Every dollar short of the peg usually comes off the price, dollar for dollar. A business delivered with empty shelves and collected receivables is a business you paid for twice.

The trap

Seasonal businesses. Close right after the busy season and the "normal" level looks low - set the peg on a single month and you can hand back a six-figure swing you never negotiated.

The lesson The headline price is not the final price. The deal is not done being priced until working capital is counted - ask for monthly balance sheets, not just year-end ones.
What a screening catches A working-capital pattern that swings hard by month, flagged before the LOI - so the peg negotiation starts with your number, not the seller's.

Your turn: has a working capital true-up ever changed one of your deals?

Pattern piece - numbers illustrative Subscribe on Substack
5 pagesthe whole opinion
The Screening Card 06 - 3 min read

What a screening actually gives you

The deliverable

No 100-page report, no data dump. A screening ends in a five-page opinion you can read in one sitting - and act on the same day.

  • Page 1 - the verdict. Pursue, pursue at a price, or walk - and why, in plain English.
  • Page 2 - the earnings bridge. Reported profit to defensible profit, every addback tagged solid, soft, or seller story.
  • Page 3 - red flags by price impact. Ranked by dollars, not by how scary they sound.
  • Page 4 - the questions. Exactly what to ask the broker and seller next, in order.
  • Page 5 - the price view. What the deal looks like worth, on the numbers that survived.
What it is not

Not a QoE, not an audit, not a guarantee. It is a first look by a person who does this work, from the documents you already have. I will tell you plainly when a deal needs more than a screening.

The lesson The value is not the pages. It is the deals you do not chase - the LOIs you do not sign, the QoE fees you do not spend, the months you do not lose.
Try it First screenings are free or low-cost while I build the first ten tracked outcomes. The Screening tab shows exactly how to ask.

Your turn: what would page 1 have said about the last deal you passed on?

How it works See the Screening page

First card in this series is on its way

Coming next

I do not invent story cards. Dead Deal and Searcher Diary cards only run when a real searcher gives me three short bullets - what happened, the number, the lesson - and says I can publish them without their name.

07

The deal that died on one customer

Dead Deal - waiting on the real story. One customer concentration number, told by the searcher who walked away.

08

What a searcher learns by deal 20

Searcher Diary - needs a searcher's notes, with permission to publish.

09

A big deal, small lesson

Big Deal, Small Lesson - drawn from public M&A news, facts checked against the source before it runs.

10

The seller story that almost worked

Dead Deal - waiting on the real story. The addback that survived two rounds of questions and died on the third.

The screening

Send me a deal before you sign an LOI and I will give you a straight first look at the numbers, before you spend months - or a quality of earnings fee - on the wrong one.

What it is

You send the CIM and the financials you already have. I read the deal the way I read deals at work: I test the addbacks, rebuild the earnings to a number I can defend, and rank what is wrong by what it does to the price. You get a clear opinion while walking away still costs you nothing.

Let me be plain about the limits. This is not an audit and it is not a full quality of earnings job. It is the step before those. It tells you whether they are worth paying for on this deal.

What you get: five pages

  • P1
    The verdictPursue, pursue at a price, or walk - and why, in plain English.
  • P2
    The earnings bridgeReported profit to defensible profit, each addback tagged solid, soft, or seller story.
  • P3
    Red flags ranked by price impactCustomer concentration, margin drift, owner dependence - ordered by dollars at risk.
  • P4
    The questions to ask nextThe exact list for the broker and seller, in the order to ask them.
  • P5
    The price viewWhat the deal looks like worth on the numbers that survived the screen.

See a sample report

This is what the five pages look like in practice. View the sample screening report (PDF)

Fictional sample with invented numbers — not a client deal.

What it costs

Your first screening is free or low-cost while I build the first ten tracked outcomes. After that, I price screenings per deal - still a fraction of a QoE, because the point is to run one on every serious deal, not just the one you end up buying. Searchers screen dozens of deals. One good screen tends to lead to the next.

How to ask

  1. Build your request below - deal size, sector, stage, and what documents you have. Copy it.
  2. Send it by replying to any email from The Addback. Not subscribed yet? Subscribe on Substack first. I reply to every request myself. No form letter.
  3. I will write back first on fit and timing. If it is a fit, you send the CIM and financials, and I do the work page by page until the five pages hold up.

About

I am a chartered accountant, and I do financial due diligence for a living - quality of earnings, addbacks, working capital, and the rest of the numbers that decide what a small business is actually worth.

I started The Addback because I kept seeing the same thing. A buyer would fall for a tidy broker spreadsheet, sign an LOI, and only then learn what the earnings really were. The deals I screen here are under $10M in revenue. They are too small for a full diligence team, and far too big to buy on trust.

How I work is simple, and I hold myself to it on every card and every screening. I check the document before I repeat the claim. If the numbers do not support a point, I say so and leave it out. If a screening is not enough for a deal, I say that too, even when it costs me the work. And I do the slow part properly: three years side by side, invoices where invoices exist, market prices where a claim needs one. Shortcuts are how buyers overpay.

MicroExit is the name I use for the screening work behind this feed - a pre-LOI first look for searchers and small buyers. The Addback is where I write. The screening is where I work on your deal, one deal at a time.

Chartered Accountant (ICAI) - MS in Accounting, Clark University
Senior, Transaction Advisory Services - Financial Due Diligence
Also writes on small-business deals for the Worcester Business Journal

One rule I do not bend: I never write up a client deal. Real stories run only when the person who lived them gives me their own short notes and says I can publish them without their name. Everything else here is labeled for what it is - a pattern piece or a composite, with numbers marked illustrative. A feed about checking numbers should be straight about its own.

The reading, the replies, and the screenings happen here and by email.

Thanks for reading. If a card saves you from one bad LOI, it has done its job.

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