Does the EBITDA on the teaser survive professionalization?

February 18, 2026

by a professional-advisory from Wilfrid Laurier University - School of Business and Economics in Toronto, ON, Canada

I've been analyzing 600+ lower middle market listings and one pattern keeps showing up: the EBITDA on the teaser rarely survives professionalization. Most owners are the GM, sales lead, and ops department rolled into one. That margin is real — for them. But once you layer in a real GM, sales support, and admin to replace what the owner is doing for free, margins compress significantly. The implied multiple changes dramatically when you normalize for this. Curious how other searchers are approaching this in diligence — are you building your own normalization model, or relying on the broker's numbers as a starting point?

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Reply by a searcher
from Emory University in Atlanta, GA, USA

The biggest and most common issue I have encountered are sellers who misrepresent their actual work and impact - both with broker and non-broker represented deals. Sellers of small businesses are typically quite adept sales people and know how to effectively dodge these types of questions without overtly lying. This can lead to late understanding of their actual work and subsequent adjustments can either break deals, or even worse, leave buyers holding the bag when it becomes clear after closing which may lead to litigation. The other element is knowing what you might have to do to bring a business into compliance. Many small business owners live in a grey area in regard to regulations, which further strengthens the buyer case for asset purchases, but also can create many additional costs that may come as a surprise to a first time buyer. Last, and most critical, are seller relationships with key customers. Most critical customers tend to have long-standing relationships with the seller and despite even the best intentions of sellers, that trust is built up over years and will not transfer. So loss or reduction of business with critical customers can also occur. Caveat emptor.

Reply by a searcher
from Northwestern University in Brooklyn, NY, USA

I think it varies by size of the company the smaller the business the more the owner is involved and the more variability in the numbers. I tend to find businesses sub $750k SDE/EBITDA almost always have the owner's salary as a full add-back with no replacement CEO value and it't not a adjustment to market rate CEO either. I then find they run more of their personal expenses through the business makign it harder to substantiate the add-backs. Lastly they will tend to treat in-frequent business expenses like a capital investment that happens every 5 years or so like an add-back since they don't see it as a "regular expense" but it is regular on a less frequent basis. For that reason I tend to assume a teaser at that SDE/EBTIDA is really over by $100-$150k as a minimum.

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