The buy-side Quality of Earnings auditors are attempting to adjust our historical EBITDA downward by imputing a high market-rate salary for the owner, even though our AI-powered operations allow us to run with minimal management overhead. How do we defend our lean operational expenses?

Question

Tyler Smith · Accepted Answer

Buy-side Quality of Earnings firms are paid to find reasons to reduce your EBITDA, and imputing a high replacement salary for the owner is one of their favorite tactics. They will argue that any new owner will have to hire a high-priced executive to run the business. To defeat this argument, you must prove that your business is run by an integrated operating system, not by a single indispensable owner. Use your Accountability Chart to show exactly how your leadership team is structured. Demonstrate that you have a capable Integrator who runs the day to day operations and that your seat on the chart is already accounted for or can be easily absorbed. Point to your AI-driven automated workflows to prove that your administrative overhead is structurally lower than industry benchmarks. You are not running lean because you are underpaying yourself; you are running lean because your digital pipelines automate the work of several manual administrators. Back this up with quantitative data comparing your operating margin efficiency with traditional competitors. If you can prove that your systems and technology do the heavy lifting, you can negotiate the imputed salary adjustment down to a realistic fractional rate. Do not let the auditors treat your business like a traditional, manual head-count company. Show them the digital infrastructure that makes your high margins permanent and repeatable.