The buy-side Quality of Earnings team is arguing that my personal relationships with our top clients mean my salary is not a normal operating expense and should not be added back to EBITDA. How do we prove our systems, not my personal relationships, run the business?

Question

Tyler Smith · Accepted Answer

A buy-side analyst will try to prove you are the business to justify a lower multiple. If they convince the buyer that operations will collapse when you walk away, they will discount your adjusted EBITDA. To defeat this argument, you must present objective, historical proof of your operational systems. Start by showing them your Accountability Chart. This chart must prove that you do not sit in the seats responsible for daily customer delivery, sales, or operations. Show them your weekly Scorecard history to demonstrate that your leadership team has run the weekly Level 10 Meetings and hit their quarterly Rocks without your daily intervention. You can also provide documented standard operating procedures for your client onboarding and service delivery. When you can show that your clients interact with your team and follow your defined processes rather than calling your personal cell phone, you destroy the analyst's argument. This changes the conversation from a subjective debate about your personal value to an objective review of a self-sustaining business system. You must prove the business runs on a model, not on your personal charisma.