Expenses added back to EBITDA when presenting a business for sale, because they will not continue under the new owner: owner compensation, one-time costs, personal expenses run through the company.

Why does Add-backs matter to a founder?

Private equity prices companies on a multiple of EBITDA, so every legitimate dollar of add-backs is worth several dollars of price. But add-backs also expose a tension: books optimized to minimize taxes understate the earnings a buyer would inherit. Founders need two views of the same financials, one for the tax season and one for the exit, and the recast has to tie back cleanly.

What are the common mistakes with Add-backs?

Taking tax-optimized books to market without recasting them for enterprise value. Claiming add-backs that the buyer's quality-of-earnings review will strip out. Not documenting the reconciliation between the tax books and the recast books.

Add-backs

CONCEPT · LAST REVIEWED 2026-09 · SOURCED FROM 1 SESSION, SEP 2026

Add-backs are the expenses you add back to earnings when you present the company to a buyer, on the argument that the new owner will not incur them: above-market founder salary, a one-time legal matter, the vehicle or travel a founder runs through the business. The result is adjusted EBITDA, and adjusted EBITDA is what a financial buyer multiplies.

Why it matters

While you are operating, your accountant is right to minimize taxable income. When you are selling, that same discipline understates the business. A founder in the exit session half-joked about firing the whole dev team and adding it all back; the advisor’s serious answer was about sequencing:

From the room

“Maximize your add-backs for taxes. Just know that when you get ready to do the final step you’re going to need to re-forecast those financials with the add-backs, so that you can recast the financials for growth, not for optimizing for tax.”

— Three-exit founder who now runs an exit-readiness advisory · session, Sep 2026

Both sets of books tell the truth; they answer different questions. The recast has to reconcile line by line to the filed numbers, because the buyer’s quality-of-earnings team will check.

Where founders get it wrong

Going to market on tax-optimized books, then wondering why the multiple looks low.
Claiming aggressive add-backs that diligence strips out, which reads as a credibility problem, not an accounting one.
Not documenting how the recast ties to the tax books.

Go deeper

Running the exit process covers the EBITDA bands that add-backs feed into.
Related concepts: Quality of earnings, EBITDA multiple bands.