Recasting Financials for a Florida Business Sale (2026 Guide)

Most Florida business owners keep their books to minimize taxes. That is a rational way to run a company right up until the day you decide to sell it, and then it quietly costs you money. Every dollar of legitimate owner benefit sitting in your P&L as an ordinary expense is a dollar a buyer will not multiply when they price your business. Recasting is the work of digging those dollars back out and proving they belong to the company. Done properly, it is the highest-return week of work a seller will do before going to market. Done sloppily, it hands a buyer's quality-of-earnings team a reason to retrade your price sixty days before closing. We see both outcomes constantly in the Florida market. The difference is almost never how aggressive the seller was. It is whether every adjustment had a document behind it. ## What Recasting Actually Is Recasting restates your reported financials to show what the business actually earns for an owner, rather than what it reports to the IRS. It does not mean redoing your bookkeeping, amending returns or changing a number in QuickBooks. It means a separate bridge schedule that starts at reported net income and walks, line by labeled line, to an adjusted earnings figure a buyer can underwrite. That bridge produces one of two numbers depending on the size of your company: - **Seller's Discretionary Earnings (SDE)** — used on smaller companies, generally where adjusted earnings land under roughly $2M. SDE includes one full owner's salary and benefits, because the buyer is expected to step into the job. - **Adjusted EBITDA** — used on larger companies and by every private equity buyer. EBITDA keeps a market-rate salary for whoever runs the business in the expense base, because the buyer intends to hire a manager rather than work in the company. This distinction matters more than most sellers realize. The same business can show $1.4M of SDE and $1.05M of adjusted EBITDA, and a seller who quotes the SDE number to a private equity buyer while the buyer prices off EBITDA has created a price gap of several hundred thousand dollars out of nothing but a definition. Whatever basis you use, label it on every page. A figure without its basis is not a figure, and a seller and a buyer arguing over a number neither defined the same way is one of the most avoidable ways a deal gets stuck. ## The Add-Backs Buyers Accept Without a Fight These are the adjustments that survive diligence because they are objectively non-recurring, non-operational, or genuinely discretionary to ownership: - **Owner compensation above or below market** — your W-2 salary, distributions taken as compensation, and payroll taxes on that excess. If you pay yourself $60,000 to run a company that needs a $150,000 general manager, the adjustment runs the other direction, and a credible seller discloses that. - **Personal expenses run through the business** — a spouse on payroll who does not work in the business, personal vehicles, health insurance for family members not employed, country club dues, personal travel, cell phones for family. - **One-time professional fees** — a settled lawsuit, a systems implementation, the cost of this transaction itself. - **True non-recurring repairs** — a hurricane deductible you absorbed, a roof replaced once, cleanup after a named storm. Florida sellers have more legitimate items here than sellers in most states. - **Above-market related-party rent** — if you own the building in a separate LLC and charge the operating company $18,000 a month for space that leases at $11,000, the $7,000 spread is a real add-back. It also means you need a market rent study and a lease at market before closing. - **Non-cash items** — depreciation and amortization on an EBITDA basis, a one-time inventory or bad-debt write-off. - **Discretionary charitable contributions** made at the owner's direction rather than as marketing. ## The Add-Backs Buyers Reject This is where sellers lose credibility, and credibility is what protects your price. A rejected add-back makes the buyer re-examine every other line you submitted. - **Future improvements you have not made yet.** "If a buyer renegotiated our supplier contract they would save $90,000" is a growth thesis, not an add-back. Put it in the narrative, never in the schedule. - **Normal recurring expenses relabeled as one-time.** Marketing you spend every year. Equipment repairs on an aging fleet. Legal fees in a business that gets sued routinely. - **Florida insurance premium increases.** This one comes up in nearly every Florida deal. Commercial property and general liability premiums have risen sharply across the state, and sellers want to add back the increase as an anomaly. It is not an anomaly. It is your new run-rate, and the buyer will underwrite it as such. Where you do have a real argument is a specific, documented, one-time assessment or a storm deductible, not the base premium. - **Owner labor that has to be replaced.** If the business needs two people to cover what you do, adding back your full compensation on an EBITDA basis without a replacement-cost line is an overstatement, and the buyer's accountant will find it in a week. - **Expenses you cannot document.** Cash wages, undeposited revenue, "we do about $200,000 a year off the books." No institutional buyer and no SBA lender can lend against income that never touched a bank account or a tax return. Raising it tells a buyer your reported numbers are unreliable, which is the opposite of what recasting is for.

Adjustment Category	Typical Buyer Treatment	Documentation You Will Be Asked For
Excess owner salary / distributions	Accepted	W-2s, payroll register, K-1s
Non-working family member on payroll	Accepted	Payroll register, job descriptions
Personal auto, travel, dues, phones	Accepted	GL detail, receipts, card statements
Transaction and one-time legal fees	Accepted	Invoices, engagement letters
Hurricane deductible / storm cleanup	Accepted	Insurance claim file, invoices
Above-market related-party rent	Accepted with a condition	Market rent study, new lease at market
Depreciation and amortization	Accepted on EBITDA basis	Depreciation schedule, fixed asset list
Owner compensation with no replacement cost	Contested	Org chart, hours, market salary data
Recurring marketing called one-time	Rejected	Three-year expense trend
Base insurance premium increase	Rejected	Policy declarations, renewal history
Projected future savings	Rejected	Belongs in the growth narrative
Undocumented cash revenue	Rejected	Not fundable, do not include

## The Cash-Basis Problem Nobody Warns Florida Sellers About A large share of Florida companies in the $3M to $50M revenue range keep their books on a cash or modified-cash basis, because that is how their CPA files the return and nobody ever asked for anything else. It works fine for taxes. It falls apart in diligence. Cash-basis statements time revenue and expense by when money moved rather than when work was performed. In a construction company, a roofing contractor, or any business with progress billing and retainage, that distortion is enormous. A December collection on a job completed in September pushes income into the wrong year. A buyer's quality-of-earnings provider will convert your statements to accrual, and whichever direction the conversion goes, it will happen after you have already agreed on a price. If you are considering a sale in the next twelve to twenty-four months, get an accrual conversion done on your own schedule, by your own accountant, before a buyer does it on theirs. Two points of discipline matter: - Never mix bases in the same presentation. A cash-basis P&L alongside an accrual balance sheet produces retained earnings that do not tie, and that single inconsistency will put every other number you present under suspicion. - State the basis on every statement and every schedule, every time. Sellers who do this early often find the accrual picture is the better one, particularly in service businesses with large receivables. Sellers who skip it find out in diligence, when the only available response is to accept a lower number. ## How Recasting Translates Into Price The arithmetic is simple and it is why this work pays. Adjusted earnings are what get multiplied. Suppose a Central Florida home-services company reports $310,000 of net income, and a defensible recast surfaces $190,000 of real, documented owner benefit and genuine one-time costs: - Reported net income: $310,000 - Documented add-backs: $190,000 - Adjusted earnings: $500,000 At an illustrative three to four and a half times SDE — the real band depends entirely on industry, size, customer concentration, recurring revenue and owner dependency, so treat that as illustrative and not as a quote for any specific business — that $190,000 of recast earnings carries roughly $570,000 to $855,000 of enterprise value. That is the return on a few days of organizing documents. The reverse matters just as much. An add-back struck in diligence costs you more than its dollar value times the multiple, because you become the seller whose numbers needed correcting. ## Building a Recast Schedule That Survives Diligence A recast schedule a buyer can actually use has five properties: - **Three years plus trailing twelve months.** Buyers price off TTM and sanity-check the trend. One year proves nothing. - **One row per adjustment, never a bucket.** "Owner expenses — $142,000" is not an adjustment, it is an invitation to argue. Break it out: auto $18,400, health insurance $26,200, travel $14,800. - **A document reference on every row.** The GL account and period, the invoice, the claim number, the payroll report. If you cannot name the document, delete the row. - **A clean tie to the tax return.** Your starting point must reconcile exactly to filed returns. Every buyer and every SBA lender starts there, and a schedule that does not tie is dead on arrival. - **Honest adjustments in both directions.** A downward adjustment — a below-market salary, deferred maintenance, an understated replacement cost — does more for your credibility than any add-back does for your price. One point of Florida-specific discipline: do not confuse a distribution with compensation. Florida has no personal income tax, so many owners here take a minimal W-2 salary and most of their income as S-corp distributions. Your P&L may therefore show almost no owner compensation at all. The recast has to price the real cost of the role, not the way you chose to pay yourself. ## Frequently Asked Questions ### Should my CPA prepare the recast? Your CPA should prepare the statements and any accrual conversion, and should review the schedule. But most tax CPAs do not build recasts, because the aim of their work is the opposite — minimizing reported income. An M&A advisor builds the schedule to be defended against a buyer's analyst. ### Is recasting legal, or is it creative accounting? It is standard practice in every business sale and expected by every buyer and every SBA lender. The line is documentation: an adjustment backed by an invoice, payroll record or claim file is a recast, and one backed by a seller's recollection is a problem. Nothing about recasting changes your tax filings. ### How far in advance should I start? Twelve to twenty-four months before you want to close. That window lets you clean the books, run an accrual conversion, stop putting new personal expenses through the company and build clean years. It also means the trailing twelve months a buyer prices off is already clean, which is worth more than any single line on the schedule. ### Will a buyer's quality-of-earnings report redo all of this? Yes, on most deals above roughly $5M of enterprise value and increasingly below that. Expect every line to be tested. That is exactly why the standard is documentation rather than argument. ### What if some of my revenue is genuinely cash and off the books? Leave it out. No private equity firm and no SBA lender can underwrite income that never appeared on a tax return or a bank statement. Including it will not raise your price and may cost you the buyer. The better move is to start reporting that revenue now and sell on clean books in two to three years, which almost always nets more after tax than trying to sell on unreported income today. ## Get the Number Right Before a Buyer Sets It for You Recasting is not a spreadsheet exercise. It is where a seller decides whether the price conversation gets anchored to a documented number or to the buyer's version of one. The sellers who do best in Florida are not the ones with the most aggressive add-backs. They are the ones whose schedules never had to be defended twice. CBH Business Group represents Florida owners selling businesses in the $3M to $50M revenue range, from Miami and Fort Lauderdale through Tampa, Orlando, Jacksonville, Naples and Sarasota. We build the recast, the accrual bridge and the diligence file before the first buyer sees anything, which is the only order that protects your price. CBH was recognized among the Top 50 Brokers in Florida in 2024 and 2025 and as the #1 Top Dollar Producer in Central Florida in 2025. Start with a free valuation at https://cbhbusinessgroup.com/valuation-calculator to see what your adjusted earnings support. To walk your own P&L line by line, book a confidential call with Jesse Hastings at https://calendly.com/jesse-cbhadvisory or call (407) 908-3845. There is no cost to find out what your business is really worth.