Add-backs, and the ones that never survive diligence
An add-back is not a claim about what you spent. It is a claim about what a new owner would not spend, and it only counts if you can show it.
Business broker and founder of The Exit Files
Mike Lee
Mike Lee sells businesses across Utah, Montana, Wyoming and western Colorado, and writes here about the work owners do in the two years before a sale.
Mike Lee is a business broker covering Utah, Montana, Wyoming and western Colorado with First Choice Business Brokers Summit. He started The Exit Files because the owners who most needed good information were the ones nobody was talking to: people twelve to thirty-six months from a sale, who were not yet looking for a broker and were not going to find useful answers from one.
Most of what he writes here comes out of deals that did not close, and what would have had to change eighteen months earlier for them to have closed.
He also runs Exit Path Advisors, which does exit preparation work for a fee. That relationship is disclosed on every page of this site and set out in full on the disclosure page.
Writing by Mike Lee
Customer concentration, and the point where buyers start walking
At 40% of revenue in one customer, a buyer is not buying a business. They are buying a relationship they have never met.
Recurring revenue when you do not sell subscriptions
Buyers pay for revenue that arrives without being re-won. Very little of that requires a subscription business.
The number that comes before the valuation
What you need to net after tax and fees is more useful than what your business is worth, and almost nobody works it out first.
The thirty-day test
If you disappeared for thirty days, what would happen to revenue? Buyers are asking a version of this question the whole time, and the answer moves price more than any other single thing.
The year after
Owners who regret selling rarely regret the price. They regret not having decided what the business was for.
What happens when a buyer's accountant opens your books
They do not need to find anything wrong. They only need to be unable to verify what is right.
Why most businesses that go up for sale never sell
Only 20 to 30% of businesses taken to market actually close. The gap between the two groups is almost never the business itself.