Does the EBITDA on the teaser survive professionalization?

professional-advisory profile

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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commentor profile
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.
commentor profile
Reply by a searcher
from Johns Hopkins University in Atlanta, GA, USA
^redacted‌ - using the broker's numbers as a starting point for my own model. To your point, I've yet to see a broker's numbers that survive reality. The question is, to what extent are margins expanded? The primary issue here, from my perspective, is that - for smaller companies - it sets unrealistic expectations for the seller, and they react poorly to adjusted pricing following a remodel or during diligence (for the most part). I'll add to this that, while the behavior seems irrational and counterproductive to me, I don't fully understand Broker incentives in the sense that there are likely rational reasons for inflated margins... Generally, I just pass on mispriced deals quickly.
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