Normalize financial statements for owner adjustments

Owner-run businesses mix in personal perks and one-off costs that hide the real earnings. Normalizing (or 'recasting') the financials adds those back so a buyer sees the true profit — which directly raises your valuation.

Do this

1. List owner perks and one-time costs run through the business.
2. Add them back to show the business's true earning power (often called SDE or adjusted EBITDA).
3. Document each adjustment so a buyer can verify it.
4. Have your accountant prepare the normalized statements.

What to Normalize (Add Back)

Start from net profit and add back owner-specific / one-time items:

+ Owner's salary above market (or below — adjust down) + Personal expenses run through the business + One-time costs (a lawsuit, a big repair, a failed project) + Non-cash items (depreciation, amortization)

= Seller's Discretionary Earnings (SDE) / Adjusted EBITDA

This is the number buyers actually value. Document every add-back with proof — unsupported adjustments get thrown out in due diligence.