Most small and mid-sized LSPs are valued on a multiple of EBITDA. Not revenue, not headcount, not the number of languages on your website. EBITDA.
But here is the detail that surprises many owners: the EBITDA in your accounts is rarely the EBITDA used in the negotiation. Buyers and sellers work with Adjusted EBITDA, a normalised version that tries to show the real earning power of the business under a new owner.
The adjustments that transform one number into the other can move your valuation by hundreds of thousands of euros. And yet many sellers arrive at the negotiation table without having ever prepared them. This post explains which adjustments buyers normally accept, which ones they question, and which ones they reject without much discussion.
1. Why Adjusted EBITDA Exists
Small companies are full of costs that reflect the owner’s life, not the operations of the business. The owner pays himself above market. The spouse is on the payroll. The car, the phone plans, part of the travel. All perfectly normal in a private company. All irrelevant for a buyer, who will not inherit those costs.
At the same time, some costs are missing. The owner works as CEO, sales director and operations manager, and takes a modest salary for all three jobs. A buyer will need to pay real people to do that work.
Adjusted EBITDA corrects the accounts in both directions. This second part, the corrections that reduce EBITDA, is the one sellers systematically forget. Buyers do not forget it.
2. Adjustments Buyers Normally Accept
Some adjustments are so common that buyers expect to see them.
Excess owner compensation is the classic one. If you pay yourself 180,000 euros and a professional general manager would cost 120,000, the 60,000 difference is a reasonable add-back. The logic works because it is verifiable against market salaries.
Family members on the payroll with limited operational roles fall in the same category. So do clearly personal expenses running through the company: private travel, family phone plans, insurance that benefits only the owner.
Genuine one-off costs are also generally accepted. A litigation that is now closed. An office relocation. A TMS migration or a rebranding project. M&A preparation costs, including the fees you pay to advisors for the sale itself.
The common thread is simple. For every adjustment, the buyer asks one question: would this cost continue under a new owner? If the answer is clearly no, and you can document it, the adjustment usually survives due diligence.
3. Adjustments Buyers Question
Then there is the grey zone, where every euro will be discussed.
Recurring “one-off” costs are the typical case. A website redesign is a one-off. A website redesign that happens every two years is an operating cost with a different name. Buyers look at three or four years of accounts precisely to catch these patterns.
Marketing and business development cuts are another one. Some sellers reduce marketing spend in the year before the sale, and then present the resulting margin as the normal profitability of the company. Experienced buyers recognise this immediately, and it damages your credibility on all the other adjustments too. The quality of your earnings matters more than their size, a point we discussed in Big Revenue or Good Revenue.
Partial personal use is also negotiated line by line. The company car used 80 percent for business, the conference trip with three days of holiday attached. These adjustments are legitimate in principle, but the percentage is always a discussion.
4. Adjustments Buyers Reject
Some proposals die quickly.
Projected synergies presented as adjustments. “With your vendor rates, this cost would be 30 percent lower.” Maybe true, but that value belongs to the buyer’s plan, and buyers do not pay sellers for their own work.
Underperformance explained away. “Without that bad year with client X, our margin would be 25 percent.” The bad year happened. If client concentration caused it, the buyer will treat it as risk, not as an adjustment in your favour.
Normal business costs relabelled as extraordinary. Routine recruitment, ordinary software subscriptions, standard training. Presenting these as add-backs signals one thing to the buyer: this seller is inflating the number. From that moment, everything you present will be verified twice.
And remember the negative adjustments. If you pay yourself 40,000 euros for doing three jobs, a serious buyer will deduct the cost of replacing you at market rates. Pretending this issue does not exist only means the buyer will discover it during due diligence, at the worst possible moment for your negotiating position.
5. How to Prepare Your Adjustments
The practical instrument is the EBITDA bridge: a simple table that starts from reported EBITDA, adds the positive adjustments, subtracts the negative ones, and arrives at Adjusted EBITDA. Each line documented, each line defensible.
To give an idea of the stakes: with a 3x multiple, every 100,000 euros of Adjusted EBITDA is worth 300,000 euros of enterprise value. An adjustment that seems small in the accounts becomes very large in the price.
Two suggestions from experience.
First, prepare the bridge before going to market, ideally twelve months before. Some problems, like an artificially low owner salary or personal expenses mixed with business ones, can be cleaned in advance, and clean accounts are always more convincing than adjusted ones.
Second, be conservative. An Adjusted EBITDA that survives due diligence intact is worth more than an aggressive one that gets cut in half at the worst moment. Buyers negotiate the price once, but they judge your credibility on every single line. If the number collapses during diligence, sometimes the entire deal collapses with it, and you find yourself deciding whether to walk away after months of work.
We help LSP owners build their EBITDA bridge and stress-test it before any buyer sees it. It is one of the highest-return exercises in the whole preparation phase.
