Document Owner Addbacks Before a Sale
Make each earnings adjustment easy to follow from the financial statements to a supporting record.
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What could your next chapter look like?
Austin Business Brokers Office helps owners prepare a defensible earnings picture. An addback is an adjustment to explain, rather than a way to turn every owner expense into sale value.
Start from the reported accounts
Gather profit and loss statements, tax returns and a current balance sheet. Reconcile the starting profit figure before discussing adjustments.
Owner distributions do not automatically appear as expenses on the profit and loss statement. Moving cash to a personal account does not by itself increase normalized earnings.
Test each proposed adjustment
List the amount, period, account and reason the expense would change for a buyer. Attach a receipt or ledger detail and explain whether any replacement cost remains.
One unusual legal bill may be different from annual compliance costs. An owner role that disappears still may need a paid replacement. Avoid adding back an expense twice.
Choose the right earnings lens
Seller discretionary earnings often describes the benefit to one working owner. EBITDA analysis needs a realistic cost for the people required to run the company.
The useful measure depends on the business and likely buyer. Give your advisor the facts needed to compare both, rather than choosing the larger number.