Before you reconcile owner addbacks before a business sale, consider the records and responsibilities involved. New Orleans Business Brokers Base can connect you with a valuation partner.
Start with the reported accounts
Reconcile tax returns, the profit and loss statement and bank activity before adding adjustments. Conflicting totals raise diligence questions even when the company is profitable.
Owner distributions usually move money out of the business without appearing as an expense. They are not automatically another addback to the profit already shown.
Separate personal benefit from continuing work
For an owner operated business, SDE may include compensation and benefits for one working owner. For adjusted EBITDA, a market salary for necessary management must remain in the model.
Identify the work you perform and what replacing it costs. Removing all your compensation while assuming your duties disappear can overstate buyer earnings.
Give each adjustment a record
Show the date, amount, reason and supporting document for each proposed addback. Separate a genuinely unusual expense from maintenance or labor that will recur.
Keep debt proceeds and asset sale receipts separate from operating revenue. A buyer or lender will test whether earnings come from running the company or from events that will not repeat.
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