If the owner is still the quote desk and no manager is in the number, you are probably still in seller discretionary earnings. Say that out loud before you attach an EBITDA multiple.
What adjustments survive, and which ones get laughed out?
Survive: a documented one-time lawsuit, a storm repair, above-market related-party rent with a lease you can show, family wages reset to market. Die: “we never replace the iron,” inventory write-ups that create earnings, personal expenses without invoices, and a hope that the buyer will run the shop for free.
Quality of earnings for buyers is where those deaths are recorded. Multiples by size is where the surviving number meets a band.
| Adjustment | Institutional posture | Seller fantasy |
|---|---|---|
| Replacement GM | Subtracted if the owner still operates | “I will stay forever” as if that were EBITDA |
| Family wages | Reset to market | Leaving a $28/hour sister in as “cheap labor” |
| One-time legal | Allowed if it is actually one-time | The annual “one-time” collection letter |
| Unfunded capex | Not a seller-friendly add | Treating starved maintenance as profit |
| Inventory write-up | Not earnings | Creating EBITDA with a count |
Stanford’s 2024–25 search median of about $16 million at ~6.2x EBITDA on a ~25% margin profile is a study neighborhood (Source: Stanford GSB). Selling to a search fund is the buyer-type sibling. Quote the study when the file looks like the study.
Why 2.75x is the wrong sticker to put on adjusted EBITDA
BizBuySell’s 2.75x print is a Main Street SDE median on the 2021–2025 sold set (Source: BizBuySell). Crossing the base is how people invent a price. GF Data’s larger-EV manufacturing series — 7.2x average, 5.9x under $25 million EV in the Q1 2026 recap — describes another room (Source: Iconic recap). Neither sticker is a job-shop SDE quote wearing an EBITDA hat.
SBA 7(a) still cares about cash after debt service inside a $5 million / 10% box (Source: SBA). An “adjusted” number that ignored replacement pay will not cover the note.
How should you present adjusted EBITDA without starting a fight?
Show the bridge from net income. Name every normalization. Name the replacement package. Name what you did not add back. Then name the size band. The FAQ directory exists so this H1 does not steal the SDE H1.
Fed utilization 76.0% and ISM PMI 54.6 can support a narrative about the climate. They cannot invent an adjustment.
How do searchers and PE associates use the bridge differently?
A searcher is often buying a job they will operate. They still want the replacement-manager math so the note and the salary both fit. A PE associate is buying a reporting package. They will haircut anything that looks like owner labor, then ask whether the GM can scale. Same bridge. Different use.
Do not hand either party a CIM that says “EBITDA” when the number is still SDE. They will recast it in a weekend and trust you less on Monday. Hand them the bridge. Name the replacement package. Name the family wages. Name the one-time items. Name what you refused to add back.
If you want to stay after close, put your post-close pay in the model. A seller who stays at $80k after taking $220k out of SDE has just told the truth about the job. A seller who stays at $220k has told a different truth. Adjusted EBITDA has to pick one.
Unfunded capex will show up in the QoE even if you kept it out of the teaser. A 6.2x study print on a starved crib is not available to you. The study companies funded the iron.
What should you bring if a searcher already asked for “adjusted EBITDA”?
The bridge. The org chart. The family payroll. The capex list. Whether a GM already exists. Whether you want to stay and at what pay. Whether you have already seen a QoE engagement letter.
Adjusted EBITDA is a discipline, not a costume. If you cannot show the replacement package, you do not have it yet. If you cannot show market-rate family pay, you do not have it yet. If you added back unfunded capex, you have a brochure. Write the bridge on one page so a searcher and a 7(a) lender can argue about the same numbers instead of two different nicknames.
Institutional buyers will hire their own QoE. Your job is to make the first draft boring. Boring bridges close. Creative bridges reopen the exclusive.
Jason Taken is a business broker. He will not certify an EBITDA number for a credit committee. Show the replacement manager as a dollar, not as a promise to stay. Institutional buyers will price the job whether you name it or not.
Do not paste a 2.75x SDE sticker onto an EBITDA bridge. Crossing the base is how people invent a price. Name the size band on the same page as the bridge so the first institutional tour starts honest.
Educational information only. Read the owner fork, then book a confidential intro call if you want the bridge staged before the first institutional tour.