The buy-side Quality of Earnings firm is claiming our owner-operator salary replacement adjustment is too low and wants to add a massive management fee back into our expenses, which would slash our EBITDA. How do we defend our historical numbers?

Question

Tyler Smith · Accepted Answer

The buy-side Quality of Earnings firm is using a classic tactic to chip away at your valuation. By claiming that your replacement salary is artificially low, they want to inflate your operating expenses and reduce your adjusted EBITDA. To defeat this, you need to move the discussion from theoretical market averages to your actual operational reality.

Your strongest defense is your EOS Accountability Chart. Show the analysts exactly how your responsibilities are currently distributed among your leadership team. If you have already elevated a general manager or integrated your key functions into a self-sustaining leadership structure, you can prove that your day-to-day operational role is minimal.

Provide documented market data for replacement executives in your specific geographic region and industry. If your Accountability Chart shows that your Integrator is already running the weekly Level 10 Meeting™ and managing the day-to-day operations, the buyer has no basis for adding a massive management fee to replace you. You have already paid the replacement cost within your existing payroll.

Furthermore, ensure that any personal expenses or non-recurring items you have already run through the business are clearly documented and separated from the salary replacement calculation. By demonstrating that your business operates on a self-sustaining system, you can successfully reject their arbitrary adjustments and preserve your premium multiple.