How to think about addbacks

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by a searcher from Webster University
in Westchester, Los Angeles, CA, USA

5yrs ago

How to think about addbacks

GuessworkInvesting redacted wrote a post on addbacks redacted and I was hoping it would spark conversation.
1) I'm unclear on some lines, such as non-cash expenses. That seems really vague. Why specify how the expense was paid instead of the expense itself?
2) Would you add or subtract and reasonable add backs from this list?

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reply by a searcher 5yrs ago
from University of Virginia in Charlottesville, VA, USA

I saw one business recently that was trying to add back in marketing expenses. Another one tried to add back in necessary operational travel. I figure if the expense is going to be there after a sale then it shouldn't be an add back. I have found that depending the add backs can have a very large impact on the valuation of the company.

reply by a searcher 5yrs ago
from University of California, Los Angeles in Los Angeles, CA, USA

I agree, Jared. I use the same general principle related to ongoing expense. That covers 80%. It's the remaining 20% of edge cases that always get sticky.