What Two Weeks of Talking About the Preparation Gap Has Made Clearer
I have spent the last two weeks writing publicly about the gap between the LOI headline number and the wire amount in lower-middle-market deals. Forty or so pieces across a dozen publications. Several hundred questions and comments from founders, advisors, lenders, and bankers. A few quiet emails from people who recognized themselves in the pattern and wanted to talk through their own situation off the record.
What the two weeks have made clearer is that the preparation gap is not what most founders think it is, and it is not what most advisors talk about either.
Founders, when they describe it, tend to frame the gap as a fairness problem. They got a number. The number changed. Someone moved the goalposts. The framing is emotionally true. It is structurally wrong. The framing puts the explanation in the wrong place (bad faith on the buyer side) and pulls energy away from where the actual leverage lives (preparation work the seller controls).
Advisors, when they describe it, tend to frame the gap as a quality-of-earnings problem. The founder did not get a sell-side QofE. The add-backs were not vetted. The financial story was not lender-ready. That framing is more accurate but too narrow. A clean QofE solves part of the gap. It does not solve the part that depends on which buyer archetype is at the table, because the QofE is written before the buyer is known.
The frame the two weeks has surfaced, and the frame the research supports, is that the preparation gap is a buyer-archetype-matching problem. The same business will compress differently in a strategic auction, a sponsor auction, and a family office process. The compression patterns are not random. They track to the underwriting model the buyer applies, which tracks to the kind of buyer the seller's banker brought to the table.
The seller's leverage, then, lives upstream of the LOI. It lives in two decisions. The first decision is which buyer archetype the seller actually wants at the table. The second decision is whether the preparation work (financial story, operating story, customer cohort story, working capital story) has been built for that archetype rather than for a generic auction. Sellers who make those two decisions deliberately keep one to three percent more of the headline number at close, on average. That is not a marginal number on a thirty million dollar deal.
The research we published in April 2026 (WP-001, https://dx.doi.org/10.2139/ssrn.6515478) tracked the post-LOI adjustment patterns across the dataset and identified the preparation gap as the largest single source of LOI-to-close compression. Two weeks of public conversation has not changed that finding. It has clarified that the people who most need to act on it (founders eighteen to twenty-four months from a sale) are not the people who hear it first. The advisors hear it first, and the advisors who hear it have a window to bring it forward to their clients before the marketing process locks in choices the seller cannot reverse.
One thing the two weeks has also made clearer: there is no advantage in keeping any of this proprietary. The preparation gap is a structural feature of the lower-middle-market right now. Closing it raises the floor for the whole market. Sellers who close the gap on their own deal capture the upside on their own outcome. Advisors who help them do it earn the next referral. The information is not the asset. The discipline is.
Ron Smith, Founding Partner, Cordis Group | Editor-in-Chief, Cordis Institute | Publisher, Cordis Foundry | Member, Forbes Business Council and Fast Company Executive Board.