The buyer's Quality of Earnings auditors are trying to disallow our adjustments for non-recurring operational upgrades and personal marketing expenses, which would slash our normalized EBITDA. How do we defend these add-backs using our V/TO to prove they are truly non-recurring investments?

Question

Tyler Smith · Accepted Answer

When preparing for an exit, normalizing your EBITDA is the most critical step to maximizing your valuation. Quality of Earnings auditors will scrutinize every adjustment, seeking to disallow add-backs for owner-centric expenses, non-recurring investments, and strategic upgrades to drive down the purchase price.

To defend these adjustments, you must present a highly structured, undeniable proof trail. Use your V/TO® and historical board minutes to prove that these expenses were strategic, non-recurring investments rather than ongoing operational costs. For example, if you spent significant capital on an automated system to streamline your onboarding, show how this expense directly relates to a long-term strategic Goal.

Clearly document that this system is fully operational and requires no further development capital from the buyer.

For personal-to-business crossover expenses, maintain meticulous records and receipts. Prove that these expenses will disappear entirely once you exit the business.

By showing a direct link between your V/TO goals and these non-recurring investments, you disarm the auditors' objections. You prove that your normalized EBITDA represents the true, ongoing profitability of the company, securing the high multiple your hard work has earned.