The buy-side Quality of Earnings firm is trying to recharacterize our customer acquisition costs as fully loaded operational expenses instead of discretionary marketing investments, lowering our Adjusted EBITDA. How do we defend this categorization?

Question

Tyler Smith · Accepted Answer

Buy-side accountants look for any excuse to move numbers from discretionary marketing to fixed operational costs because it immediately slashes your Adjusted EBITDA and lowers the purchase price. To fight this recharacterization, you must present a clean, historical correlation between your marketing spend and your customer acquisition pipeline.

Begin by pulling the historical data from your weekly scorecard and V/TO®. Show the buyer that your customer acquisition costs are tied directly to active, discretionary campaigns that can be turned off at any moment without disrupting day-to-day operations. If you pause a campaign and lead flow drops but operations continue normally, that is the definition of a discretionary cost, not a fixed operational expense.

Prove that these expenses represent growth capital rather than maintenance expenses. Show how your sales and marketing seats on the Accountability Chart operate. If the marketing team is running specific, time-bound initiatives designed to capture new market share rather than maintaining existing accounts, document this distinction.

Provide the Quality of Earnings team with your customer lifetime value to customer acquisition cost ratio. A ratio above three to one proves that your customer acquisition cost is an investment in a highly profitable asset, not an operational drag. By grounding your arguments in hard, operational data from your scorecard, you transform a subjective accounting debate into an objective discussion about growth investment. This protects your EBITDA and maintains your valuation.