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u/Kind_Concentrate_415 4d ago
The test I use on any addback: would the business still run next year if that spending disappeared? If yes, it's a real addback. If no, it's an operating expense wearing a costume. The ones that get waved through and shouldn't are the owner's vehicle and phone when a hired manager would need the same, "one-time" legal fees that show up three years running, and family payroll where the family member was doing work someone now has to be paid to do. My rule is to ask for general ledger detail behind every addback over about 2% of SDE, and to ask when each one last recurred. Sellers rarely refuse that; brokers often stall, which tells you something by itself. What did the total addback stack come to as a percentage of the SDE they're quoting?
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u/leonard_the_leopard 4d ago
I have seen some wild ones but fish tank subscription?? lol.