We have run several personal vehicles, real estate holdings, and family payroll items through our business for years. How do we clean up these lifestyle expenses during our exit runway so a buyer's Quality of Earnings review is clean and straightforward?

Question

Tyler Smith · Accepted Answer

A Quality of Earnings review is designed to strip away non-operational noise and find the true, normalized EBITDA of your business. If your books are cluttered with personal vehicles, family salaries, or real estate assets, you must begin a systematic cleanup at least twenty-four months before going to market. Start by working with your CPA to run a parallel set of books or clearly document these items as add-backs. For family members on payroll, utilize your Accountability Chart to evaluate if they are in the right seat and if they GWC™ their roles. If they do not, transition them out of the business immediately. If they do, adjust their compensation to fair market value. Transfer personal assets and real estate holdings off the company balance sheet into separate legal entities. This prevents any confusion during legal due diligence and simplifies the transaction structure. When you present clean, auditable GAAP financials that require minimal adjustments, you build immediate trust with the buyer's analysts. This transparency reduces their perceived risk, streamlines the diligence phase, and protects your purchase price from late-stage re-negotiations.