Selling a business
What Do Buyers Want in a Company?
How buyers test the quality, sustainability and accuracy of your earnings, and which add-backs survive their review.
By Michael D. Rubin, CEO & Founder · Updated September 2026 · 725 words
Buyers want a company whose earnings are real, repeatable and verifiable, and the place they test all three is the adjusted earnings figure you present. How that figure is calculated, and especially which expenses are added back as one-time, often decides whether a buyer trusts your numbers or discounts them.
Selling can feel like a guessing game about what buyers want. It is less mysterious than it seems once you understand how they read earnings. Three questions sit behind nearly every request: is the profit figure honest, will it continue, and can it be proven? The sections below take each in turn, with the adjustments buyers most often accept and reject.
Quality of earnings: are the adjusted numbers believable?
Most companies in the lower middle market are valued on adjusted EBITDA: earnings before interest, taxes, depreciation and amortization, with owner-specific and one-time costs added back. Those add-backs are legitimate. An above-market owner salary, a personal vehicle, a lawsuit settlement or a one-off building repair are not costs a new owner will carry. But add-backs are also where sellers and their accountants become too aggressive, and buyers know it.
The difficulty is that nearly every business has some unusual expense every year: a roof repair one year, a legal fee the next, a new compliance requirement after that. If each is added back as one-time, the adjusted figure overstates what the business really earns. Buyers commission a quality of earnings review, an independent accounting analysis that tests every add-back, and remove any they cannot support.
The practical test is simple: would a reasonable new owner face this cost, or something like it, again? If the answer is yes, leave it in. A slightly lower adjusted figure that survives review is worth more than a higher one that collapses in due diligence, because every add-back a buyer strikes also damages their trust in the ones that remain.
Add-backs buyers usually accept, and ones they challenge
For more on how each adjustment moves value, see how add-backs affect a private company's value.
| Usually accepted with support | Often challenged |
|---|---|
| Owner salary above what a replacement manager would cost | Repairs or maintenance that recur in some form every year |
| Personal expenses paid through the business | Legal fees in a business that is regularly in disputes |
| A single settled lawsuit | Bonuses described as one-time but paid every year |
| Costs of a discontinued product line | Savings a buyer might achieve but you have not |
| A one-time relocation or system conversion | Expenses with no invoices or records behind them |
Sustainability: will earnings hold after the sale?
A buyer does not want to purchase at the peak, or discover that a profitable year rested on one contract that will not renew, or watch earnings fade soon after closing. They compare growth rates over several years and ask whether the company can grow at the same pace or faster under new ownership.
Rising earnings with an explainable cause, such as new customers, new services or added capacity, earn a better multiple than a single strong year. If growth has slowed, say why and what you have done about it. Buyers also look at the quality of revenue behind the earnings: how much comes from contracts or repeat customers, how concentrated it is and whether margins have held. Earnings built on a broad, loyal customer base are the kind buyers expect to last.
Verification: everything will be checked
Assume every figure will be traced to a source document. Buyers and their accountants match financial statements to tax returns and bank statements, review pending or threatened claims, look at product returns and warranty costs, and read major contracts. They are looking for anything that could surprise them after they own the company.
Having the right records ready is the fastest way through. Our answer on the financial statements you need for a valuation lists them.
How we prepare earnings a buyer will accept
MDR & Associates prepares a financial recast for every company before it goes to market, and we build it conservatively: each add-back documented, recurring costs left in. A recast that survives the buyer's quality of earnings review protects the price agreed in the letter of intent. Where an owner needs a formal, defensible figure, a third-party business valuation is available separately. To see what your adjusted earnings might support, start with a valuation snapshot.
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Questions owners ask next
Should I commission my own quality of earnings review before selling?
For larger or more complex companies it can be worth it, because it finds problems before a buyer does and speeds up due diligence. For many companies a careful recast by your CPA and advisor is enough. Discuss the cost and benefit with both before deciding.
What happens if a buyer rejects some of my add-backs?
The adjusted earnings figure falls, and so does the price if it was set as a multiple of earnings. That is why documentation matters. Competing offers also help, because a buyer who retrades aggressively risks losing the deal to another bidder.