The buy-side Quality of Earnings team is challenging our owner salary add-backs, claiming our replacement CEOs would cost twice our current market salaries. How do we use our Accountability Chart to defend our normalized EBITDA?

Question

Tyler Smith · Accepted Answer

When a buyer challenges your owner salary add-backs, they are trying to artificially inflate your operating expenses to lower your adjusted EBITDA and purchase price. To defend your numbers, you must move the conversation from subjective opinions to objective operational realities. You do this by presenting your EOS Accountability Chart.

Show the buy-side team your clear division of responsibilities. If you have been acting as both the Visionary and the Integrator, prove that those roles are now distinct or can be consolidated into your existing leadership team. Map out every seat in your organization and show the market-rate compensation for each specific function. If you have already elevated a key leader to run the day-to-day operations as the Integrator, your personal salary as the owner is a pure add-back because your operational replacement is already sitting in that seat and fully compensated in your current run-rate expenses.

Do not let the buyer assign a hypothetical, inflated corporate executive salary to your business. Use your Accountability Chart to demonstrate that your existing leadership team has the capacity and the capability to run the business without you. If you can prove that your team possesses the right conative makeup, using tools like the Kolbe Index to show they naturally excel at follow-through and execution, you demonstrate that a high-priced external replacement is completely unnecessary. This preserves your normalized EBITDA and keeps your valuation multiple right where it belongs.