The buy-side Quality of Earnings auditor is challenging our EBITDA add-backs for personal vehicle leases, family members on payroll, and one-time software integration costs. How do we prove these are legitimate adjustments to defend our adjusted EBITDA multiple?

Question

Tyler Smith · Accepted Answer

To survive a buy-side Quality of Earnings review with your valuation multiple intact, you must defend your normalization adjustments with flawless documentation. Buyers and their forensic accountants will aggressively challenge any add-backs for personal expenses, discretionary spend, or one-time operational costs.

Start by preparing a detailed audit trail for every single adjustment. If you add back personal vehicle leases, club memberships, or family members on payroll, do not rely on estimates. Provide general ledger details, invoices, and clear evidence of how these expenses will disappear post-transaction.

For family members or redundant employees, use your EOS Accountability Chart. Show the auditor the current structure versus the post-close structure. Prove that these seats are either being eliminated entirely or can be absorbed by existing team members who GWC, or Get, Want, and have the Capacity to do, the work.

For one-time expenses, like a major software implementation or rebranding effort, prove these are capital investments rather than recurring operating costs. Presenting clean data through the lens of a highly organized, EOS-run business shows the auditor that your adjustments are objective business decisions, not creative accounting.