So I'm getting ready to list my ecommerce store (selling custom phone cases) and my broker asked for a detailed add-back schedule. I spent two weeks going through 3 years of P&L and bank statements. Here's what I came up with: personal Amazon purchases that accidentally went through the business card (~$4k/yr), my 'business' meals that were really just me and my wife on Friday nights, and the biggest one: I pay my cousin $18k/year to 'manage social media' but he basically just posts memes. I added all that back to net profit. Is this normal? Am I overthinking? My broker said 'that's fine, they'll discount it anyway' but I want to hear from people who've actually sold.
Add-backs
How I calculated net profit add-backs for my online business
The cousin thing is going to be a problem if a buyer catches it. If he's not really providing a service, that's not an add-back, that's a red flag. Just my two cents.
Did you document any of this or just pull numbers out of thin air? Add-backs need support. Bank statements, invoices, whatever. If your cousin invoice says 'social media services' But it's really just a funnel to family, SBA lender might not accept it.
Also wtf is a 'normal' add-back. Nothing is normal. I've seen people add back their dog's vet bills as 'security expenses.'
OP, your broker is right that buyers will discount whatever you give them, but you want to present a clean number so you're not negotiating from a defensive position. The personal Amazon stuff is fine if you can show a clear pattern. The wife meals are borderline—if they were truly personal, add them back but be ready to explain. The cousin situation, though... if I were a buyer I'd ask to see the actual social media growth over those three years. If it's been flat, that $18k looks like a payoff, not an expense.
Actually, I'd push back on the 'just add it all back' approach. Some of that looks like you're inflating earnings. Which is fine in theory, but if your add-backs are too aggressive, you might scare off serious buyers who see through it. Better to be conservative and leave some meat on the bone.
This whole thread is why I hired an accountant to do my add-backs. Worth evety penny.
lol @SixStringSage—people think they can DIY this and then wonder why they get lowball offers. It's not just math, it's storytelling.
Thanks for the reality check. i pulled all the bank statements for the Amazon stuff and the meals. The cousin thing I'm still on the fence about. Maybe I'll list it as a 'related party expense' and let the buyer decide. But the social media accounts have actually grown a lot—we have 80k followers now—so maybe it's worth something? Not sure. I'm going to redo the schedule and probably just take a more conservative approach. Appreciate the input.