6 Numbers a Buyer Will Recalculate When You Sell Your Business
Sam's List Editorial | 2026-08-01
Here is the thing nobody tells you about selling a business: the buyer is not buying your numbers. They are buying their own version of your numbers, rebuilt from your data by someone whose job is to find reasons the figure should be lower.
That is what a quality of earnings process is. Understanding what buyers look at when you sell your business, and which of your numbers will not survive contact, is the difference between negotiating from your model and reacting to theirs. These are the six they always rebuild.
1. Adjusted EBITDA, and Which Add-Backs Survive
Every seller presents adjusted EBITDA. Every buyer re-adjusts it. The gap between the two versions is usually the largest single item in the negotiation.
Add-backs that generally hold up are one-time, documentable, and clearly not part of the ongoing business: a legal settlement, a failed product launch with its own cost coding, a one-off severance. Add-backs that generally do not hold up are recurring costs described as unusual, personal expenses run through the business, and anything where the documentation is a verbal explanation.
The uncomfortable part is that personal expenses in the books cut both ways. Yes, adding them back raises EBITDA. It also tells the buyer your records mix personal and business spending, which makes them discount everything else you present. A clean set of books with fewer add-backs often produces a better outcome than a messy set with more.
2. Net Working Capital and the Peg
This is the number that most often moves actual cash at closing, and the one sellers understand least.
Most deals set a working capital peg, a normal level of receivables plus inventory minus payables that the business is expected to deliver at close. Deliver less and the purchase price adjusts down. Deliver more and it may adjust up, though the mechanics are frequently asymmetric.
The peg is usually built from a trailing twelve-month average, which means the buyer is calculating it from months you have already lived. If your collections have been slow all year, that becomes the normal you are held to. If you accelerate collections right before close to build cash, you deliver below-peg working capital and give back the same money at settlement. Seasonality matters enormously here and is worth modeling with your adviser well before a letter of intent.
3. Revenue Quality: Recurring, Concentrated, and Cut Off Correctly
Buyers do not value all revenue the same way, so they take your top line apart.
They separate recurring from one-time, because a subscription dollar and a project dollar do not deserve the same multiple. They measure customer concentration, and a business where one client is 35 percent of revenue is priced differently than one where the largest is 8 percent, regardless of the total. And they test cutoff, meaning whether revenue was recognized in the right period rather than pulled forward.
There is a real benefit to getting ahead of this. A seller who can already show recurring versus non-recurring revenue, a concentration table, and a defensible recognition policy shortens diligence and controls the narrative. The counterweight: this analysis can also reveal concentration or seasonality the seller had never quantified, and once it is in a data room it cannot be unseen. Better to find it yourself first.
4. Owner Compensation Normalized to a Market Rate
If you pay yourself $400,000 and a hired general manager doing your job would cost $180,000, a buyer adds back $220,000. If you pay yourself $60,000 and take the rest in distributions, a buyer subtracts the difference between $60,000 and market.
The second version surprises people. Under-paying yourself does not inflate the value of your business, because the buyer replaces you with someone at market. The same logic applies to family members on payroll who do not work there, and to yourself if you plan to leave and the business genuinely needs two people to replace you.
Getting this right is mostly a documentation exercise: what the role actually is, what the market rate is, and what the business will need after you go.
5. Capex Versus Repairs, Because They Will Re-Sort It
Buyers re-examine what you capitalized and what you expensed, and they do it in both directions.
Aggressive capitalization inflates EBITDA by moving costs to the balance sheet, so a buyer moves recurring maintenance back into operating expense and your EBITDA drops. Aggressive expensing has the opposite effect, and while that looks conservative, it can obscure the maintenance capex the business genuinely requires, which the buyer will then estimate for you, usually unfavorably.
They also look for deferred maintenance. A business with an equipment base at the end of its useful life carries a capital requirement the buyer prices in, whether or not it appears anywhere in your financials.
6. Deferred Revenue and Customer Deposits
Cash you have collected for work you have not delivered is a liability, and buyers treat it as one twice: once on the balance sheet and once in the working capital calculation.
The pattern that causes problems is recognizing deposits or annual prepayments as revenue on receipt. It flatters both revenue and EBITDA in the current period, and diligence reverses it. The reversal is usually worse than the original overstatement, because it also raises a question about every other judgment in the books.
Prepaid-heavy businesses should also expect a conversation about who funds the delivery obligation after close. That is a negotiated term, not an accounting one, but it starts from whether your deferred revenue balance is accurate.
The Six at a Glance
| Number | What you present | What the buyer does | Where it usually hurts |
|---|---|---|---|
| Adjusted EBITDA | Your add-back schedule | Accepts fewer add-backs | Recurring costs labeled one-time |
| Net working capital | A closing balance | Sets a trailing-twelve peg | Cash adjustment at settlement |
| Revenue quality | A top-line total | Splits recurring, concentration, cutoff | Customer concentration |
| Owner compensation | Your actual salary | Normalizes to market rate | Under-paying yourself |
| Capex versus repairs | Your capitalization policy | Re-sorts both directions | Deferred maintenance |
| Deferred revenue | Sometimes booked as revenue | Restates it as a liability | Double hit to EBITDA and working capital |
What Actually Moves the Outcome
None of these numbers are fixable in the 60 days before a letter of intent. They are functions of how the books have been kept, which is why sellers who start two or three years out do better than sellers who start when a broker calls.
The three that matter most: keep personal spending out of the business entirely, apply a written revenue recognition policy consistently, and be able to produce a monthly trailing-twelve view of working capital without a special project.
Where Specialist Help Earns Its Fee
Sell-side preparation is a different discipline from tax compliance. It is about anticipating a specific counterparty's analysis and having the support ready before they ask.
Ursa Consultants is a Sam's List accounting firm based in New York, working since 2018 with venture-backed startups, the client type that lives through diligence repeatedly. A firm accustomed to investor and acquirer scrutiny knows which support gets asked for and how it should be structured.
Being straight about what this does and does not do: preparation improves the defensibility of your numbers and can shorten a diligence process. It does not set your price, which is driven by market conditions, buyer appetite, and the business itself, and no outcome here is guaranteed. Confirm scope and credentials before engaging, and review the firm's profile on Sam's List.
Frequently Asked Questions
What is adjusted EBITDA and why does a buyer change mine? Adjusted EBITDA is earnings before interest, taxes, depreciation, and amortization, with non-recurring items added back. A buyer recalculates it because add-backs are judgment calls and their incentive is to accept fewer. Items that are one-time and documentable usually survive. Recurring costs relabeled as unusual, and personal expenses run through the business, usually do not.
What is a working capital peg in a business sale? It is the normal level of net working capital, typically receivables plus inventory minus payables, that the seller is expected to deliver at closing, usually set from a trailing twelve-month average. Delivering less reduces the purchase price at settlement. Because it is calculated from months already in the past, it is worth modeling with an adviser before signing a letter of intent.
How far in advance should I prepare my books to sell? Most of what a buyer recalculates depends on multi-year patterns, so two to three years is a realistic runway. The three items that matter most are keeping personal spending out of the business, applying a consistent written revenue recognition policy, and being able to produce monthly working capital without a special project.
Does paying myself a low salary increase what my business is worth? Generally no. A buyer normalizes owner compensation to what a market-rate replacement would cost, so under-paying yourself gets adjusted downward just as over-paying gets added back. The same normalization applies to family members on payroll who do not work in the business.
About the author: Kimberly Green is the cofounder of Sam's List, where business owners and high earners find vetted CPAs, financial advisors, and fractional CFOs. She's met one-on-one with 400+ financial professionals and writes from the real data behind thousands of client-advisor matches. Ask her anything about finding an accountant - she's heard it all, including the questions people are afraid to ask.