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Trying to Sell Your Business? Skipping This One Step Will Leave a Fortune on the Table

1 38 30
03.09.2021

You’ve decided you want to sell your business and you’re excited about it. You’ve poured years of effort into building your empire, you have buyer interest or even an offer on the table, and for the first time in years, you can see the light at the end of the tunnel. A part of you wants to just power through, seal the deal and ride off into the sunset.

Not so fast. While it can feel tempting to rush into the sale, doing so without properly calculating seller’s discretionary earnings (SDE) can often leave tens of thousands or even hundreds of thousands of dollars on the table. Most likely, your business will be sold as a multiple of SDE, and SDE equals net income plus add-backs. Most of us are intimately familiar with that first number, but the second number is the secret sauce behind lucrative exits.

Add-backs are owner benefits and non-recurring expenses that are on your current financial statements, but will not carry through when a new owner takes the reins. Digging for them and adding them “back” below your net income line in your exported P&L is vital if you want to command top dollar for your business.

I’ve helped thousands of people sell their online businesses over the years, and not factoring in add-backs to a company’s valuation is one of the biggest mistakes I see owners make. In my book The EXITpreneur’s Playbook: How To Sell Your Online Business For Top Dollar By Reverse Engineering Your Pathway To Success, I go into detail with plenty of numbers and examples on why ignoring or rushing through add-backs could cost you the equivalent of your child’s college education. Here’s a rundown of what add-backs are and the three levels of add-backs most relevant for entrepreneurs.

Again, add-backs are........

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