The FNDRS Playbook · PB11 · Pre-emption
The add-back defensibility matrix
Buyers accept add-backs that are both conventional and documented, such as owner compensation above market with the payroll records, or a settled lawsuit with the invoice. Documented but debatable items are presented apart from adjusted EBITDA; contested, undocumented ones, such as savings that would have been, are excluded.
How does a buyer treat your add-backs?
An add-back is an argument. Some arguments win.
Not all add-backs are equal. Some are accepted without discussion. Some are accepted with documentation. Some are negotiated. Some destroy the credibility of everything else on the list.
We sort every proposed adjustment before a buyer does.
Premium exits are not negotiated. They are prepared.
The figure
What makes an add-back defensible?
An add-back is defensible when you can prove it with a contract, an invoice, or a payroll record, and the market routinely accepts that kind of adjustment.
Provable but unproven
Owner compensation, one-time items. Conventional, but the evidence has not been gathered.
What to do Document now; these are worth the multiple.
Bankable
TargetOwner compensation above market with the payroll records; a settled lawsuit with the invoice.
What to do Include, with the file behind each.
Credibility risk
Savings that would have been, aggressive personal expenses, undocumented cash.
What to do Exclude. One of these can sink the whole list.
Negotiable
Documented but debatable: a pro forma price increase, a discontinued product line.
What to do Present separately as additional considerations, not in Adjusted EBITDA.
- Buyer acceptance
- Does the market routinely accept this kind of adjustment?
- Documentation
- Can you prove it with a contract, an invoice, or a payroll record?
How to read it
Proposed add-backs are sorted by how well they are documented (horizontal) and how routinely buyers accept that type of adjustment (vertical). Only the top right belongs in the headline Adjusted EBITDA.
Timing
The time to start the conversation is now
How far out you feel is not the signal. Buyers read the trailing numbers, so time before a sale is room to move them, not a waiting room. A founder with a number in mind may reach it in one sale or in two: a majority stake now, with equity rolled into the buyer’s company for a second sale later. The sale itself, once you sign, runs in four phases.
Read the exit timing windowFour phases, for a company that is ready. The conversation can start any time before.
See where your business sits
The Go-To-Market Analysis (GTMA) places your business on these frameworks with your own numbers, before a buyer does.