During the buy-side Quality of Earnings, the diligence team added back expenses for open positions and claimed our leadership team salaries are thirty percent below market, reducing our adjusted EBITDA. How do we use our Accountability Chart and operating cadence to defeat these negative pro forma wage adjustments?

Question

Tyler Smith · Accepted Answer

Quality of Earnings teams often manufacture negative pro forma wage adjustments by claiming an owner or executive team is underpaid, or that unfilled roles require immediate outside hires at inflated market rates. Their objective is to compress adjusted EBITDA and justify a purchase price reduction.

Defeat this tactic by presenting your documented EOS Accountability Chart alongside your operational performance data. Show the diligence team that your current organizational structure is stable, right-sized, and operating with high productivity. If the buyer claims your leadership seats are undercompensated, demonstrate that your total compensation model includes performance-based incentives aligned with industry benchmarks, and present historical retention metrics showing low leadership turnover.

For open seats that the buyer wants to burden with negative wage adjustments, show how those responsibilities are already handled across existing seats using the GWC framework. Point to your quarterly Rocks and operational Scorecard data over the trailing twelve months to prove that target company output was achieved without service disruptions or excessive overtime.

If you are running an AI-powered back office or automated workflows, show that process automation permanently eliminated the need to backfill those positions. Do not let diligence accountants impose theoretical compensation models over proven operational reality. Rebut each adjustment with factual payroll records and documented process ownership.