We migrated our entire enterprise resource planning system last year which cost us significant consulting fees, but the buyer's Quality of Earnings auditor is refusing to accept this as an EBITDA add back. How do we defend this adjustment?

Question

Tyler Smith · Accepted Answer

The Quality of Earnings auditor wants to keep your EBITDA as low as possible to reduce the purchase price. They will argue that software upgrades are recurring operating costs of doing business, rather than one-time capital expenditures.

To defend this adjustment, you must prove the non-recurring and capital-like nature of the ERP migration. First, provide documented evidence of your system history. Show that this is a once-in-a-decade upgrade, not an annual software maintenance expense.

Second, isolate the internal and external costs. Separate the one-time consulting fees and data migration costs from your standard licensing fees. Present these invoices as discrete, non-operational investments that do not reflect your run-rate expenses.

Third, link the investment to future efficiency. Use your EOS V/TO® to show how this new platform supports your long-term scalability and lowers future administrative costs.

During your preparation, use Keith Cunningham's Thinking Time framework to anticipate their objections. Ask how you can structure the financial narrative to show that these costs are truly historical and will not recur post-close. Providing a clear, audited paper trail shuts down their attempts to discount your EBITDA.