How to calculate 'Normalized' EBITDA?

Normalized EBITDA adds back 'owner-specific' expenses to reveal true profitability. This is the single most effective lever to increase exit valuation. We reverse tax-minimization strategies to present the 'economic earning power' of the business. ### Technical Explanation Swiss SME financial statements are prepared for tax authorities (profit suppression). In M&A, we must reverse this through Normalization. The difference between Statutory EBITDA and Normalized EBITDA is often the difference between a failed sale and a windfall. #### Key Normalization Categories 1. Owner Compensation: Adjusting owner salaries to market rates. If an owner takes CHF 400k but a CEO costs CHF 200k, we add back CHF 200k. 2. Personal Expenses: Private vehicles, leisure travel, club memberships. 3. Real Estate: Deducting notional market rent if the SME owns its property (valuing RE separately). 4. One-Offs: Legal settlements, restructuring costs, extraordinary repairs. #### The Multiplier Effect An expense of CHF 50,000 hidden in accounts reduces tax by ~CHF 10,000. Adding it back to EBITDA in a company trading at 6x increases Enterprise Value by CHF 300,000. The owner trades CHF 10k of tax savings today for CHF 300k of exit value tomorrow.