The buyer's Quality of Earnings provider is refusing to add back our historical EOS® implementation and consulting fees, claiming they are normal operating expenses rather than one-time, non-recurring costs. How do we prove these expenses were non-recurring strategic investments that have institutionalized our operations?

Question

Tyler Smith · Accepted Answer

During the Quality of Earnings review, buy-side analysts will search for any reason to classify strategic investments as normal operating expenses to depress your trailing EBITDA. A common target is the historical cost of implementing your EOS® processes, including external implementer fees and software.

To defend these adjustments, you must prove that these expenses were finite, non-recurring strategic investments that have fundamentally institutionalized your business operations. Present your implementation timeline to show that these costs were part of a defined, multi-month project to establish your operational foundation, not ongoing maintenance expenses.

Show the buyer how your leadership team now runs your Level 10 Meetings™ and updates your V/TO® independently, proving that the high external implementation costs are behind you. Highlight how this investment has built a highly structured, self-sustaining management system that directly reduces the buyer's transition risk.

By proving that your EOS® implementation is complete and has successfully institutionalized your operations, you can rightfully argue that these historical fees should be added back to your trailing EBITDA. This adjustment directly increases your transaction value and ensures you do not pay a double tax on the very systems that made your business highly attractive to the buyer.