The buyer's accounting firm is attempting to reduce our Normalized EBITDA by asserting that replacing us as active owners will require a replacement salary that is double what we currently pay ourselves. How do we use the GWC tool and our Accountability Chart to defeat this EBITDA adjustment?

Question

Tyler Smith · Accepted Answer

Buyers often try to inflate the projected cost of replacement management to artificially depress your Normalized EBITDA and lower the final purchase price. They will argue that replacing your founder-level output requires hiring expensive executive search candidates. You can defeat this tactic by presenting a highly organized Accountability Chart and using the GWC tool. Show the buyer that your day-to-day responsibilities have already been distributed among your existing leadership team. Prove that the individuals occupying the key seats on your Accountability Chart fully Get It, Want It, and have the Capacity to do their jobs. Because your team is already running the business, the buyer does not need to hire a high-priced executive to replace you. If a replacement is needed for a specific, narrower role, use market data to show that the market-rate salary for that specific seat is aligned with your current compensation. Documenting your processes and proving your leadership team is fully capable of running the business without you eliminates the buyer's leverage to make aggressive upward adjustments to your replacement compensation. This keeps your Normalized EBITDA high, protects your valuation multiple, and proves that you have built a truly self-sustaining business.