Let’s talk about adjusted EBITDA.
Every owner has a list.
Vehicle.
Travel.
Family payroll.
Non-recurring expenses.
Legitimate add-backs exist.
Banks, however, accept proof, not creativity.
Many deals collapse not because buyers walk away, but because lenders strip out questionable adjustments during underwriting.
A broker may suggest five times earnings.
Underwriting recalculates.
Compensation is normalized.
Weak add-backs are removed.
Margins are stress tested.
Five times becomes 3.8.
Multiples are constrained by debt service coverage.
If cash flow cannot safely cover the loan, leverage drops.
When leverage drops, so does price.
Preparation is not about inflating EBITDA.
It is about cleaning it.
Premium multiples go to businesses with:
- Clean books
- Monthly closes
- Clear compensation structures
- Stable margins
If you would like to see your financials through a lender’s lens before going to market, I am happy to schedule a confidential Readiness Review.
Valuation surprises are expensive.
Clarity is not.