What Are “Iffy” Add-Backs When Selling Your Business?

When selling a business, owners often “add back” certain expenses that a buyer wouldn’t expect to continue after the sale. These legitimate add-backs can help increase the company’s value. However, some add-backs can be questionable — or “iffy.” Here are a few examples:

• Marketing expenses that didn’t generate results.
• One-time IT upgrades that the owner assumes won’t recur.
• The owner’s salary or role, if it will need to be replaced by new management.
• Personal expenses, such as groceries or travel.
• Charitable donations.
• Employee perks or annual events that may not carry over to a new owner.

Before presenting financials, discuss potential add-backs with your M&A advisor to ensure they’re justifiable and won’t raise red flags with buyers.