Conversation about acceptable ad back with off market seller

April 18, 2026

by a searcher from Northwestern University - Kellogg School of Management in Brooklyn, NY, USA

I’m looking at a business where the seller thinks he has a EBDITA of $800,000 however she is adding back 100% of his salary, adding back accounts payable and subtracting accounts receivable when you remove the accounts payable and accounts receivable because those are more balance sheet items and you adjust to acceptable replacement salary for a CEO the truth EBITDA is around 450 to 475. Even at that lower amount, I’m still interested but naturally at a slightly lower multiple and as a multiple of that lower EBITD, how do people recommend explaining acceptable and non-acceptable add back to seller? Do you recommend sending an email outlining it on a phone call or something else. Please note this is a non-broker deal and off market.

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Reply by an intermediary
in Sydney NSW, Australia

Hi Tucker, always a challenging situation. In my experience, many vendors have never sold a business before and can have limited understanding of how buyers assess maintainable earnings. They often see their own wage and the profitability of the business as one and the same, which can make the discussion around normalised earnings difficult. I would treat this more as a conversation than an email exchange. It may be a lack of education rather than a deliberate negotiation tactic, and a conversation gives you the ability to test that, explain the buyer’s position, and pivot if needed. One question I often ask is: if this wage is being added back on the basis that the role is not required, how would the business operate without that role being performed? I also like to ask the vendor, genuinely, how much time they spend in the business. If they say they are working 50 or 60 hours a week, but also say the role is not needed, then the natural question is: why were you doing it, and what exactly were you doing during that time? The important point is that the business produced its profits with that person in that role, doing what they did, together with the contractors or staff around them. That is the operating model that generated the result. Most buyers today are not looking to simply buy themselves a job. They need to see a reasonable wage for their own involvement, as well as a fair commercial return on the capital and risk they are taking. I would also go back to the start and understand why the vendor is considering selling in the first place. What is the driver? What problem are they trying to solve? Once you understand that, you can often shape the offer or discussion around what actually matters to them, rather than getting stuck in a technical argument over add-backs. Another useful way to frame it is to ask the vendor to reverse the situation: if they were the buyer, would they see this as a good opportunity? How would they operate the business? How long would it take them to repay debt? Would they be excited by the risk and return profile? If they would not see it as compelling from the buyer’s side, then it is unlikely other buyers will either. Finally, if the vendor is not genuinely motivated, sometimes the best thing you can do is be prepared to walk away. In many cases, once a business owner starts to picture the sale not happening, the reality of continuing on can shift their perspective and bring the discussion back to a more reasonable place. Just a thought, but that approach has worked well for me.

Reply by a lender
from Eastern Illinois University in 900 E Diehl Rd, Naperville, IL 60563, USA

I would recommend starting with a call or doing the initial walk through in person, that way you can go through it in detail. If you need any support, we offer a free review of transactions and can provide you feedback from a lender perspective you could share after a call or meeting. We have done this many times to help educate sellers on how lenders will look at deals and what is ordinary and legitimate add-backs. You can reach me here or directly at redacted if you have any interest. One thing to keep in mind, the seller might be making these adjustments to get to a minimum number they want for the business. If that is the case they might not accept a lower number as they are off market and might only be looking to sell if they get the number they want. So if you get a ton of push back, it might be because they will only sell for that number. Just something to keep in mind.

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