SOP #48 — Add-Back Scrutiny

SOP #48 — Add-Back Scrutiny

Sellers inflate profit with "add-backs" — expenses they claim you won't inherit. Challenge every one.

1. List each add-back line and its dollar value. Fail if seller won't itemize.
2. Owner salary: add it back only if you'll truly do the work yourself. Otherwise reject.
3. One-time costs (a rebrand, a legal fee): verify with the invoice. Fail without proof.
4. Software you'll keep using (hosting, SEO tools): reject the add-back — it's a real cost.
5. Contractor pay for content: reject if the site needs ongoing content. It's operational.
6. Recompute the multiple on the honest profit, not the adjusted one. Fail if you anchor to seller math.

Save this — run it every deal.