How detailed should an LOI be?

It's definitely a balancing act as you want to lock the business owner in to the deal with you and want to be clear on the major deal points so the deal doesn't get blown up after you've spent a lot of time and money on due diligence. At the same time, you may not want it to get too detailed because then you may end up going back and forth on a deal point that is not that material - if you're further along in diligence, both parties will likely be more amiable to compromise on smaller items. And you don't want to overwhelm the seller with the offer details. My thought process is to always be explicitly clear on the major points and open ended on the smaller points (managerial salaries, stay bonus amounts, etc.)

You should add specificity for elements of the business that you feel that you've been able to get a good grasp of based on diligence thus far. So for something like working capital, if you understand the business and are ready to negotiate the different components to include, what the target should be based on etc., then that should be dealt with in the LOI. Same with any salaries or consulting fees for owners. But if you're just digging in you don't want to negotiate on specifics where you still need to learn more, otherwise you may end up regretting getting too granular. Even though LOI's are non-binding, there's no better way to make a seller angry than trying to re-trade on the LOI terms. It's really more in the seller's interest to be more specific before they grant you exclusivity, so also keep that in mind. But you also want to make sure there's an actual deal on the table that works for you before wasting any more time. A balancing act, like all parts of an acquisition!