What sellers often miss
Many owners assume a buyer will accept an add-back because it is reasonable. Buyers are not evaluating whether an adjustment sounds reasonable. They are evaluating whether it is supportable. A legitimate add-back with poor documentation can be rejected just as easily as an improper one.
The takeaway
Credibility is built on evidence. Every adjustment included in your EBITDA calculation should be accompanied by documentation strong enough to withstand scrutiny from a buyer, lender, investor, and accounting firm. The burden of proof belongs to the seller.
Illustrative, not your deal. Where the book uses dollar figures, they are there to show how something works, not to describe your business. Your banker, your accountant, and your attorney will put real numbers to your own situation. Full note.
Terms this chapter uses
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