Selling your ecommerce business? This episode is a must-listen primer on "add backs" – expenses that can be re-added to your profit to significantly increase your business valuation. Learn how to identify, document, and negotiate these crucial adjustments to maximize your sale price.
Key takeaways
Understand that "add backs" are expenses incurred by the owner that are not essential for a new owner, helping to present a truer picture of the business's ongoing profitability.
Legitimately categorize owner salaries, personal benefits, one-time legal fees (trademarks, patents), non-recurring operational costs (like employee removal or change in service providers), and even certain credit card rewards or mastermind fees as add backs.
Be prepared to document and justify every add back to potential buyers. The more clearly you can demonstrate that an expense is non-recurring or personal, the stronger your negotiation position.
Familiarize yourself with the concept of "negative add backs" – adjustments that can decrease valuation – to avoid missteps during the sale process.
Recognize that proper accounting for add backs can significantly impact the multiple applied to your net profit, directly increasing your business’s sale price.
Chris Duty is back on the podcast as a special guest to talk about all the types of add backs you need to know when selling your ecommerce business. The inspiration for today came from a listener submitted question, which asked "what type of add backs can I negotiate when selling my ecommerce business?" When selling an ecommerce business, its important for owners to be compensated for the stressful one-time events that was experienced in the last 12 months when going to sell. These are called "Add Backs", but what are they exactly? I've invited Chris Duty, an advisor from Quiet Light Brokerage, to talk about the various types of Add Backs that you need to know about, why they matter, and how it can significantly impact the valuation of a business to potential buyers. Here's some timestamps for your convenience: 0:00 - Introduction 0:31 - Ad Spot 2:46 - Background of Today's Subject 4:50 - What is an Add Back? 7:16 - Accrual Accounting 11:04 - Owner Salaries 13:20 - Value of Working Less 16:13 - Payroll Taxes / Income Taxes 17:53 - Trademarks, Copyrights, Patents and Other Legal Fees 19:44 - Change in Service Provider Costs 20:26 - Employee Removal Costs 22:21 - How Mike Views Add Backs 27:33 - Cash Back / Points Credit Cards 30:26 - What if you use a regular credit card? 31:51 - Masterminds & Ecommerce Courses 32:27 - Lowered COGS 37:46 - Negative Add Backs 39:51 - Price Changes 43:33 - Conclusion We hope today's episode was useful to you. If you want to get in touch with Chris you can find him at Linkedin or you can check out the company at Quie
What does this episode say about finance & fundraising?
Understand that "add backs" are expenses incurred by the owner that are not essential for a new owner, helping to present a truer picture of the business's ongoing profitability.
What does this episode say about founder & leadership?
Legitimately categorize owner salaries, personal benefits, one-time legal fees (trademarks, patents), non-recurring operational costs (like employee removal or change in service providers), and even certain credit card rewards or mastermind fees as add backs.
What does this episode say about finance & fundraising?
Be prepared to document and justify every add back to potential buyers. The more clearly you can demonstrate that an expense is non-recurring or personal, the stronger your negotiation position.
What does this episode say about finance & fundraising?
Familiarize yourself with the concept of "negative add backs" – adjustments that can decrease valuation – to avoid missteps during the sale process.
What does this episode say about finance & fundraising?
Recognize that proper accounting for add backs can significantly impact the multiple applied to your net profit, directly increasing your business’s sale price.
