Your adjusted EBITDA may not match the number a buyer uses. The P&L is a starting point. From there, a buyer will ask what profit remains after replacing partner labor. They’ll also ask what it will cost to keep the firm current.

Adjusted EBITDA starts with partner labor

CPA firm owners often use “profit” to mean what’s left for the partners. A buyer separates two things: the return on ownership and the pay for work performed.

Consider a selling partner who brings in business, reviews engagements, manages staff and handles major clients. That work doesn’t vanish after closing. Someone still has to do it, and the buyer will put a market cost against it.

Partner pay is also rising across the profession. The AICPA’s 2025 National MAP Survey found that compensation per equity partner increased 10.2%. That makes it even more important to price partner roles realistically.

A simple example

Suppose the firm shows $2 million of profit before paying two working partners. Their continuing jobs would cost $250,000 each to replace.

Profit before partner compensation $2,000,000
Market cost to replace two partner roles ($500,000)
Starting point for sustainable EBITDA $1,500,000

That’s only the beginning. The buyer will also look at the hiring, systems and capacity the firm needs.

The other $500,000 was real income to the partners. It just paid for labor the firm still needs. And because buyers apply a multiple to EBITDA, the gap gets magnified in the price. Our guide to EBITDA multiples shows how.

Build the adjusted EBITDA bridge line by line

  • Start with reported operating earnings.
  • Add back personal, discretionary and truly nonrecurring expenses that can be documented.
  • Remove one-time income and temporary savings.
  • Charge market compensation and benefits for continuing operating roles.
  • Normalize related-party rent, family payroll and other non-market arrangements.
  • Account for any immediate hires or investments needed to keep the firm running.
  • Arrive at an adjusted EBITDA figure you can defend.

Good EBITDA add-backs survive questions

A personal vehicle expense may be easy to support. A claim that the buyer can raise prices 15% on day one is not an add-back. Neither is “future efficiency” that depends on cutting people the firm still needs.

Each add-back should come with documentation a buyer can verify. If you can’t explain it in one sentence and back it up, expect it to be challenged.

Investment can lower EBITDA, and that’s OK

There’s another side to this. Sensible investment in leaders, technology or advisory capability may reduce today’s EBITDA. At the same time, it can build a stronger business.

Keep the receipts: purpose, cost, adoption and results. A buyer won’t add back an ongoing cost just because you call it strategic. Still, a documented investment story can explain where the firm is headed.

To see how buyers weigh all of this, read how business and professional services companies are valued. If a sale is ahead, our guide to preparing a professional services company for sale is a good next step.

Sources and context

Educational material only. A firm’s value and transaction structure depend on its specific facts, buyer universe, market conditions, tax considerations and legal requirements.