01
Begin with reported performance
Use the actual period and source records. Explain the relationship between operating profit, depreciation, amortisation and reported EBITDA, and keep any differences between statutory and management accounts visible.
Figures should be attributed to their source, with material judgements identified. Forecasts, run-rate calculations and historic results should not be blended without clear labelling.
02
Separate add-backs from ongoing costs
An owner’s salary is not automatically an add-back. Where the departing owner performs commercial, management or operational work, a purchaser may need to replace that function. A credible adjustment explains both the exiting cost and the realistic ongoing cost of replacement.
Other proposed adjustments, such as genuinely exceptional professional costs or completed one-off system projects, need evidence that the expenditure was incurred, was included in the reported period and is not expected to recur in ordinary operations. Recurring costs must remain in the earnings base.
03
Show the arithmetic openly
Our fictional Caledonian sample starts with FY2026 reported EBITDA of £258,000. It adds back £80,000 of departing-owner employment costs, deducts £55,000 for replacement commercial management and adds £12,000 for a completed one-off data migration, resulting in illustrative adjusted EBITDA of £295,000.
The £295,000 is not a valuation, a cash-flow forecast or assurance that a purchaser will accept those adjustments. The description of each item, the relevant dates and its supporting source are as important as the arithmetic.
04
Document the disagreements as well as the agreement
Buyer and seller may differ on whether a cost is genuinely exceptional or how much management resource is required. The IM can record the proposed basis and its supporting rationale, leaving detailed verification and negotiation to the transaction process. Clarity makes the discussion easier to resolve.
General guidance only. Any financial adjustments and commercial statements require evidence and review for the particular business. This service does not replace due diligence, valuation, legal, tax or accountancy advice.