Adjusted EBITDA is about as reliable as a politician’s promise.
It’s built to make a business look good, not to share the real story.
Sure, on the surface, it looks fantastic.
Sellers can remove expenses—one-time costs, owner perks, and "non-recurring" items.
This makes the business seem like a well-oiled machine.
But let’s get real for a minute.
Are those “non-recurring” expenses really gone for good?
Are those owner perks actually irrelevant?
Or, are you about to walk into a deal built on smoke and mirrors?
Truth is you cannot sweep many of these so-called "adjustments" under the rug and pretend they don’t matter.
The more you analyze these changes, the more you'll see that adjusted EBITDA is subjective.
It's a number that inflates profit and not a true picture of what you are buying.
It ignores working capital changes, interest, taxes, and depreciation.
All these affect what is actually going into your bank account.
But also...
You won’t see those underpaid family members who are part of the workforce.
You won’t see the deferred maintenance that is waiting for you to inherit.
You won’t catch the marketing expenses that the owner has been dodging.
But you will feel the hit when those costs pile up after buying the business.
Once that owner walks away, things can change fast.
The bottom line?
You cannot spend adjusted EBITDA.
Adjusted EBITDA is not the complete picture.
It's important to dig deeper.
To look at the actual cash flow.
To understand the true costs of running the business.
Because at the end of the day, cash is king.
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