Before making a big decision, like buying or selling a business, you must ensure you have all the information. Some of the information you need when buying or selling a business is the finances, which involve add-backs. If this is your first time hearing about add-backs, keep reading below to discover more about this and how it may affect your business transaction. 

What Are Add Backs? 

Add-backs are more critical for buyers than they are for sellers. Add-seller is more vital for buyers than they are for sellers. The seller's add-backs are adjustments to their discretionary earnings that allow buyers to calculate the profits they can expect from buying a business. This adjustment allows for a more "accurate" company valuation.

Examples Of Add Backs

We can use a few add-back examples, but the two most important and common ones are one-time expenses and owner benefits. Many owners receive additional benefits from their businesses beyond their salaries and profits. These include a company car, certain types of memberships, and traveling expenses. 

In addition, some expenses occur only once. These one-time expenses decrease profits but cannot be accounted for as regular business expenses. They could be adjusted if they happened during the years used to calculate the SDE (Seller's Discretionary Earnings). 

How We Can Help You Find Add Backs

Vend Advisors is your strategic partner to maximize value and growth in your business. We will help you review the finances of the company you want to buy before sitting down with the sellers. We want to help you ensure you are making the right financial decisions for yourself. Contact us today so we can start working together to improve your business!