30 Apr 2026

How to Defend Add-Backs and Maximize Sale Price
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How to Defend Add-Backs and Maximize Sale Price

By Jeff DeGarmo|2026-04-03T19:41:35+00:00April 30th, 2026|Categories: Selling a Business|Tags: EBITDA, exit planning, Financial Normalization, SBA Loans, SDE|

How to Defend Add-Backs and Maximize Sale Price

When you prepare to sell, your tax returns are often your own worst enemy. Like most owners, you likely minimize your tax liability by expensing as much as possible. However, when it comes to business valuation, those expenses hide your true profit. To get paid what your company is actually worth, you must master the “Art of Recasting.”

Why Every $1.00 of “Add-Backs” Matters

Recasting is the process of adjusting your financials to show a new owner the “true economic benefit” of the business. In the world of M&A, your sale price is typically a multiple of your earnings.

If your industry carries a 4x multiple, every $1.00 you successfully “add back” to your earnings increases your sale price by $4.00. Finding $50,000 in defensible add-backs could literally put an extra $200,000 in your pocket at closing. This is the fastest way to focus on maximizing enterprise value.

The Three Buckets of Add-Backs

Not all expenses are created equal in the eyes of a buyer or a lender. To protect your business valuation, you must categorize your adjustments correctly:

The Standard Items: These are easily accepted. They include your salary, payroll taxes on that salary, your health insurance, and 401k contributions. This also might include charitable expenses or inactive family members on payroll. Depreciation, Amortization, Interest Expense and most taxes specific to the seller are added back.
One-Time Operational Costs: These are defensible if you have proof. Examples include a one-time $50,000 roof replacement, legal fees from a finished lawsuit, or “startup” costs for a product line you discontinued.
The “Danger Zone” (Personal Expenses): This includes family vehicles, travel, and meals. While common, being too aggressive here can kill your deal. If a lender sees too many personal “perks,” they may lose trust in your entire financial package.

The “30-Second Rule” for Credibility

In the 2026 market, credibility is your most valuable currency. Professional brokers and lenders use the “Conservative Rule”: If you have to spend more than 30 seconds explaining why an expense is an add-back, it’s probably not a good add-back.

If you lose credibility on one small, “creative” item, a buyer will stop trusting your numbers entirely. Worse, an SBA lender might decline the buyer’s loan application, causing your deal to collapse regardless of the agreed-upon price.

The Strategy: Start “Paying Your Taxes” Early

If you plan to exit in the next 1–2 years, the best business valuation strategy is to stop aggressive expensing now.

It sounds counterintuitive, but showing maximum profit on your tax returns is more profitable than “hiding” it in expenses. A clean tax return often commands a higher “multiple.” The extra taxes you pay now are usually dwarfed by the massive increase in the final sale price.

So, what is the right choice?

Don’t wait until you have a Letter of Intent to look at your “recast” numbers. You need to know your true SDE (Seller’s Discretionary Earnings) today so you can fix your financials before a buyer sees them.

Are you unsure if your “add-backs” will stand up to a bank’s scrutiny? I can perform a professional financial recast of your last three years to show you exactly how a buyer will view your value. Reach out today for a confidential “Bankability Test” of your financials.

Photo by Kelly Sikkema on Unsplash

23 Apr 2026

The Roadmap to a Successful Exit: 7 Steps to Selling Your Business
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The Roadmap to a Successful Exit: 7 Steps to Selling Your Business

By Jeff DeGarmo|2026-04-24T19:59:35+00:00April 23rd, 2026|Categories: Scaling a Business, Selling a Business|Tags: Business Valuation, Deal Structure, exit planning, M&A Process|

The Roadmap to a Successful Exit: 7 Steps to Selling Your Business

A successful business exit strategy requires more than just finding a buyer. It demands a structured approach to ensure you receive the highest possible value. Many owners rush the process and leave money on the table. By following a standard professional roadmap, you can navigate the complexities of the market with confidence.

Step 1: Discovery & Strategic Alignment

First, you must determine what your business is worth. A professional valuation analyzes your financials, market position, and growth potential. This step aligns your expectations with current market realities. It is the foundation of any strong business exit strategy.

Step 2: Valuation & Scenario Modeling

Next, you must gather all vital documentation. This includes three years of financial statements, tax returns, and equipment lists. You should also identify and fix any “value leaks” in your operations. A clean, organized business attracts higher-quality buyers.

Step 3: Preparation & Packaging

Confidentiality is critical when selling. You do not want employees, customers, or competitors to know the business is for sale prematurely. Professional advisors use “blind profiles” to generate interest. This protects your brand while reaching a global pool of qualified buyers.

Step 4: Marketing & Buyer Targeting

Not every interested party is a fit. You must vet buyers for financial capability and industry experience. Once a buyer passes screening, you can hold initial “chemistry” meetings. These discussions ensure the buyer’s goals align with your legacy.

Step 5: Negotiation & Offer Structuring

When a buyer is serious, they submit a Letter of Intent. This document outlines the purchase price and deal structure. Your business exit strategy should focus on terms, not just the price. This includes seller financing, earnouts, and transition periods.

Step 6: Diligence & Execution Management

Due diligence is the most intense part of the sale. The buyer will verify every detail of your business. They will inspect contracts, financial records, and legal standing. Staying organized during this phase prevents the deal from collapsing.

Step 7: Closing and the Transition Period

Finally, legal counsel prepares the definitive purchase agreement. Once both parties sign, funds are transferred, and the sale is official. Most deals include a transition period. During this time, you help the new owner learn the ropes to ensure long-term success.

So, what is the right choice?

Following a structured process reduces stress and increases your final payout. Jumping steps leads to errors and lower offers.

Are you ready to begin your journey toward a successful exit? I can help you build a customized roadmap that prioritizes your goals and maximizes your value. Reach out today to schedule your confidential valuation and take the first step toward your next chapter.

The Roadmap to a Successful Exit: 7 Steps to Selling Your Business

16 Apr 2026

Beyond the Cash Offer: Using Creative Structure to Get Your Full Price
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Beyond the Cash Offer: Using Creative Structure to Get Your Full Price

By Jeff DeGarmo|2026-03-16T19:32:49+00:00April 16th, 2026|Categories: Selling a Business|Tags: business exit strategy, creative deal structures, earnouts, Maximizing sale value, Seller Financing|

Beyond the Cash Offer: Using Creative Structure to Get Your Full Price

When you list your business, you likely have a specific “walk-away” number in mind. However, many buyers lead with all-cash offers that feel disappointingly low. These “lowball” offers happen because buyers price in the risks of a transition. If you want to reach your full asking price, you must look beyond a simple cash closing.

Bridge the Gap with Seller Financing

Seller financing is your most powerful tool for maximizing sale value. In this structure, you act as the bank for a portion of the purchase price. Buyers often pay a higher total price when they can spread payments over several years.

This setup also signals your confidence in the company’s future. Because you are willing to “carry paper,” the buyer feels safer paying your full price. Additionally, you earn interest on that money, which often beats traditional investment returns.

Use Earnouts for Future Performance

Sometimes a buyer doubts your future growth projections. An earnout allows you to prove them right while securing your price. You receive a portion of the sale price at closing and the rest later.

These future payments depend on the business hitting specific revenue or profit goals. This structure protects the buyer while ensuring you receive every dollar you deserve. It turns a “no” into a “yes” by betting on your own success.

The Role of Equity Rollovers

If you believe your business will explode in value under new ownership, consider an equity rollover. You keep a small percentage of ownership in the new entity. When the buyer eventually sells the company again, your “second bite of the apple” can be significant.

This strategy is excellent for maximizing sale value over a longer horizon. It aligns your interests with the buyer and can lead to a much larger total payout than any initial cash offer.

Why Structure Trumps Price

A high price with bad terms can result in less money than a lower price with great terms. You must consider the tax implications of each structure. Spreading payments out can often keep you in a lower tax bracket. This means you keep more of the total sale price in your pocket.

So, what is the right choice?

Stop looking at the cash offer as the final word. Creative financing turns “impossible” deals into successful exits. If you stay flexible on the “how,” you can usually get your “how much.”

Are you tired of receiving offers that don’t reflect your hard work? I specialize in building deal structures that bridge the gap between buyer caution and your valuation goals. Reach out today, and let’s build a strategy to get you the full price you deserve.

Photo by Giorgio Trovato on Unsplash

9 Apr 2026

How to Protect Your Cash at Closing
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How to Protect Your Cash at Closing

By Jeff DeGarmo|2026-04-03T19:33:12+00:00April 9th, 2026|Categories: Buying a Business, Selling a Business|Tags: Deal Structure, exit planning, M&A Negotiations, Working Capital|

How to Protect Your Cash at Closing

You have agreed on a price. The due diligence is done. You are 72 hours away from the wire transfer—and suddenly, the deal is on life support. The culprit? Working Capital. In the world of M&A, working capital is often the “war zone” of the final hour. To a seller, it feels like the buyer is trying to shave money off the price. To a buyer, it’s about ensuring the business has enough “fuel” to run on Day 1. If you want to succeed in maximizing sale value, you must address this early.

What is Working Capital? (The “Gas in the Tank” Analogy)

Think of your business as a car you are selling. The purchase price covers the car itself, but the buyer expects there to be enough gas in the tank to drive it home.

In business terms, Working Capital = Current Assets (Cash, Inventory, Accounts Receivable) minus Current Liabilities (Accounts Payable, Accrued Expenses).

The buyer needs this “operational fuel” to pay employees and suppliers before the first new invoices are collected. If you “drain the tank” by collecting every penny of your Accounts Receivable (AR) right before you hand over the keys, the buyer has to inject their own cash immediately. They will rightfully demand a price reduction to compensate for that.

Establishing “The Peg”

To prevent a fight, both parties must agree on “The Peg.” This is a target dollar amount of working capital the seller agrees to leave in the business at closing.

Because most businesses are seasonal, we don’t just look at yesterday’s balance sheet. Instead, we typically use a 12-month or 24-month rolling average to find a “normalized” number.

Common Conflict Zones to Watch For

Excess Cash: Usually, cash is “excluded.” The seller keeps the cash in the bank, but they must leave enough behind to cover the immediate bills. Anything above the required operating cash is yours to take as proceeds.
Accounts Receivable (AR): This is the biggest friction point. If the “Peg” requires $100k in assets and you only have $80k in AR at closing, you must leave $20k in cash to make up the difference.
The Gift Card & Deposit Trap: If you have collected $50,000 in customer deposits or gift cards, that is “unearned revenue.” You have the cash, but the buyer has the obligation to do the work. Usually, you have to leave that cash behind so the buyer can fulfill those orders.

The 90-Day “True-Up”

No matter how hard you prepare, the numbers on closing day are often estimates. That is why a standard exit strategy includes a “90-Day True-Up.”

Three months after the sale, the buyer and seller sit down to look at the actual numbers. If the AR you left behind turned out to be “bad debt” that couldn’t be collected, the price is adjusted downward. If you left more value than required, the buyer writes you a check for the difference.

Why You Must Address This in the LOI

The biggest mistake is leaving working capital “for the lawyers to handle later.” By the time the lawyers get involved, emotions are high and the deal is fragile.

A professional deal should define the working capital target and the exact formula used to calculate it directly in the Letter of Intent (LOI). When everyone knows the rules of the game from the start, there is no “war”—just a math equation.

So, what is the right choice?

Clean up your accounting at least a year before you sell. Accrual-based accounting makes these calculations transparent and leaves very little room for a buyer to manipulate the numbers to their advantage.

Are you worried that a “Working Capital War” might cost you thousands at the closing table? I can help you calculate your “Peg” now and build a defensive strategy to protect your proceeds. Contact me today for a confidential review of your balance sheet before you sign an LOI.

Photo by Joel Timothy on Unsplash