Adjustments and Addbacks
Why Adjust EBITDA?
We’ll cover the reasons behind “normalizing” EBITDA with addbacks and adjustments.
The best and easiest way to learn about what is appropriate is to look at actual worksheets of real addbacks used in transactions. We’ll walk through each situation and discuss addbacks such as life insurance, private aircraft use, and even any upfront brokerage fee. Specifically we’ll look at these situations:
- A “clean” statement with standard adjustments such as one-time events
- A common statement with a few owner benefits and perks.
- A over-the-top statement with excessive owner benefits and perks. We’ll pause here to discuss running personal expenses through the business, the percentages of businesses I see with nominal amounts and the percent I see that I consider excessive (ie.e go to jail excessive), so you’ll be able to see how you compare to other businesses.
- Another example of an over-the-top statement, this time not the amount, but the sheer number of adjustments
- An example and discussion of how to handle R&D expenses
- An example and discussion on how to handle “strategic” addbacks to EBITDA (those obtained by being acquired by someone in your business)
A worksheet is provided with a explanation of how to best identify and document adjustments and addbacks.
|Adjustment & Addback PowerPoint Slides||Download|
|IRS tax cases||Download|
|Quick and easy EBITDA template with adjustments. If you are not selling any time soon, you really don't need to identify expense accounts - just use this spreadsheet and estimate adjustments.||Excel||Download|
|Adjustment / addback template with expense categories.||Excel||Download|
|Simple addback example||Excel||Download|
|More expansive addback example||Excel||Download|
|Vineyard and ski hut example||Excel||Download|
|Research and Development addback example||Excel||Download|
|Strategic addback example||Excel||Download|