Why most lower-middle market companies leak profit (and how to spot it during Diligence)

Hi everyone, I’m Chad Cudworth. I’ve spent the last 25 years as a CFO and Operating Partner for Family Offices, PE firms, and National Retailers/Wholesalers. I’m new to the Searchfunder community and wanted to share a "red flag" I see constantly in lower-middle market targets: Misaligned Incentives. One of my most significant margin engineering projects involved a retailer where sales staff were 'gaming' volume-based commissions, causing 8-10% margin leakage. The EBITDA looked okay, but the cash flow was inefficient. - The Fix: We redesigned the comp model to align with Gross Profit Dollars rather than revenue. - The Result: We recovered $20M in margin. My advice to Searchers currently in LOI: Don't just look at the historical financials. Look at the incentive structures. If the sales team is paid on volume, your margin may be artificial. I am currently opening up capacity to help Searchers with Due Diligence and Post-Close Value Creation. If you want a second set of eyes on a deal or need to professionalize your new acquisition's finance function, feel free to DM me. For those who have closed a deal recently, what was the biggest financial surprise you found in the first 90 days? #Introduction #FractionalCFO #DueDiligence #OperatingPartner #ETA