{"id":758,"date":"2022-10-04T18:55:42","date_gmt":"2022-10-04T18:55:42","guid":{"rendered":"https:\/\/360vetsales.com\/?p=758"},"modified":"2022-10-04T18:55:42","modified_gmt":"2022-10-04T18:55:42","slug":"dont-leave-money-on-the-table-by-missing-add-backs-one-offs","status":"publish","type":"post","link":"https:\/\/360vetsales.com\/dont-leave-money-on-the-table-by-missing-add-backs-one-offs\/","title":{"rendered":"Don\u2019t Leave Money on the Table by Missing Add Backs & One Offs"},"content":{"rendered":"
When selling your veterinary practice, you should understand that the price you get will be based on a valuation of your EBITDA (earnings before interest, taxes, depreciation, and amortization). EBITDA is a measurement of a business\u2019 free cash flow and a good way to understand how much cash a business generates from operating activities alone since it excludes things like debt and other non-operating expenses.<\/p>\n
To truly leverage your value, your valuation should be based on Adjusted EBITDA. This is when EBITDA moves up or down based on one-off or add back expenses.<\/p>\n
What can we use to adjust EBITDA? The short answer is a lot of things, and it changes from practice to practice. Here is an example:<\/p>\n
Other examples can include, but aren\u2019t limited to, salaries for your spouse, family and friends that will no longer work for your practice post-transaction, the cost of using outsourced services such as accounting, marketing, etc., vehicle expenses, travel and entertainment expenditures, and other costs that you run through your practice. Chances are when you no longer own your practice there are several expenses that will no longer exist on your income statement, all of which should be considered add backs to your EBITDA.<\/span><\/p>\n In addition to add backs, you should also take a look at \u201cone offs\u201d or \u201cone-time expenses.\u201d Often, valuations are based on a trailing twelve month or last calendar year income statement. If you had expenses during that time that were out of the ordinary, or \u201cone offs,\u201d they should be added back to increase your EBITDA. Examples include:<\/p>\n\n