What are “Add-Backs” and How Do They Impact Business Valuations?

Add-backs are expenses a business incurs, but a new owner likely wouldn’t. Think personal perks, one-time costs, or services the business won’t need going forward. When we identify valid add-backs, we remove them from the expense column and add them back to the company’s cash flow, which more accurately reflects the value of the business.

When it’s time to sell your business, your financial statements tell a story. But if you’re still running meals, cars, and wellness retreats through the P&L, that story might need a little editing. That’s where add-backs come in.

Add-backs are a crucial part of the business valuation process, especially in the lower middle market. For business owners, understanding how they work can make a seven-figure difference when it comes time to sell. We spoke with Viking M&A experts Andrew Rehwinkel (Dallas), Kyle Kerrigan (Nashville), and Mike Donahue (Charlotte) to break it all down.

What Are Add-Backs? (and Why They Matter)

Add-backs are expenses a business incurs, but a new owner likely wouldn’t. Think personal perks, one-time costs, or services the business won’t need going forward. When we identify valid add-backs, we remove them from the expense column and add them back to the company’s cash flow.

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