The Translation Table
The same operational reality. Four audiences. Four descriptions.
Each audience is technically accurate from where they sit. The language divergence is real — and in a transaction room, it costs value.
FounderOwner-operator
How they say itOur EBITDA is $5M. We've had a strong couple of years and the business is growing.
What they mean operationallyThe founder is reporting what the P&L says. They are not aware that several components of that $5M will be adjusted out during quality of earnings analysis.
OperatorCEO / MD
How they say itReported EBITDA of $5M includes approximately $600K of non-recurring items and $200K of below-market founder remuneration. Normalised EBITDA is closer to $4.4M. Additionally, the revenue base includes one customer at 28% — this will attract a quality discount during diligence.
What they mean operationallyThe operator is performing the normalisation before the buyer does — identifying the QofE adjustments that are coming and quantifying the impact.
M&A AdviserTransaction Adviser
How they say itWe would typically expect normalised EBITDA of $4.2–4.4M after QofE adjustments. We should build this into our pricing expectations to avoid renegotiation during diligence.
What they mean operationallyThe adviser is pre-positioning the founder so that the QofE finding does not come as a surprise — and so the founder does not negotiate a price based on a number that will not survive the data room.
Private EquityOperating Partner
How they say itQofE analysis shows normalised EBITDA of $4.1M after applying standard adjustments. We will structure the offer on this basis. The headline enterprise value will be calculated on normalised earnings.
What they mean operationallyPE is treating the reported EBITDA as a starting point, not an endpoint. The offer will be based on the number that survives their QofE analysis — which the founder may not have anticipated.
Translation Gap
The founder's EBITDA is reported. The buyer's EBITDA is normalised. Every quality of earnings adjustment reduces the base number that the buyer will multiple. Understanding which adjustments will apply — and addressing them before entering a process — is one of the highest-value pre-transaction activities available to a founder.
What the gap costs
The value consequence of speaking different languages in the same room.
Every adjustment in a quality of earnings analysis reduces the earnings base that buyers will multiple. Non-recurring revenue is removed. Founder salary normalisation adds back below-market remuneration. Customer concentration adjustments reduce the defensibility of the revenue. The aggregate of these adjustments determines the normalised EBITDA — which may be 15–30% lower than the reported figure.
Connected Architecture
Frameworks, doctrine, and tools that close this translation gap.