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

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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