What are “add-backs” when selling a business?

The term “add-backs” generally refers to certain owner-specific expenses that may be adjusted when evaluating a business’s financial performance. These adjustments are intended to help buyers better understand how the business may perform under new ownership.

Because every business is different, determining appropriate adjustments often requires careful review of the financial records and consultation with qualified accounting professionals when appropriate.

Understanding how buyers evaluate financial performance can help owners better prepare for the selling process.