During the buy-side Quality of Earnings review, the analyst claims our leadership team salaries are below market rate and is proposing a three-hundred-thousand-dollar pro forma EBITDA reduction. How do we defend our compensation structure using our Accountability Chart?

Question

Tyler Smith · Accepted Answer

Buy-side Quality of Earnings firms frequently manufacture pro forma compensation adjustments to depress your adjusted EBITDA and chip away at your valuation multiple. Their argument is that your current executives are underpaid and a replacement management team will cost more. You dismantle this tactic using your EOS® Accountability Chart and verifiable market wage benchmarks.

Start by showing the buyer the exact seat definitions and five major roles for each member of your leadership team. If your leaders GWC™ their seats and receive market-aligned performance bonuses tied to company goals, their compensation is economically sound.

Present third-party regional compensation studies matching your industry and revenue tier to disprove the analyst's inflated numbers. If the buyer is planning to insert redundant corporate management layers or corporate overhead from an existing platform company, that is a buyer-side integration choice, not a deficit of your historical standalone business.

Stand firm: pro forma EBITDA reductions must reflect the actual, proven cost to run the business today, not hypothetical corporate staffing models. Use your quarterly Rocks and performance Scorecards to show that your existing team delivers the numbers at their current comp levels.