Previously posted in Inc by Andrew Silver
Here are 7 common add backs that can boost your (earnings before interest, taxes depreciation and amortization) EBITDA and company value:
Owner’s salary and compensation–usually the largest single add back item. However, even if you’re retiring, someone will have to lead the company and be paid a fair salary. Therefore, salaries can’t be eliminated entirely. Many private company owners often take home more than a “market rate” salary and the bottom line should be adjusted to add back compensation in excess of the market rate, or what it would cost to hire a successor.
Salaries and bonuses paid to relative–if they will not continue working for the company post-transaction they should be added back.
Personal travel–that is commonly linked to business travel.
Vehicles– if not used primarily for business purposes.
Life insurance premiums and other fringe benefits–provided for the owner or their family members.
Read full article via Get Adjusted: Making the Most of your Bottom Line | Inc.com.