This week's business is a luxury chauffeur service in Nashville — executive transfers, airport runs, corporate clients. Eleven years old, 4.9 stars, loyal drivers, two private airports that refer it exclusively. Genuinely nice fundamentals.

It reports $583,000 in earnings and asks $2.5M — about 4.3x. But two details in the listing quietly tell you that $583,000 is not the number a serious buyer will actually value. And understanding why teaches you the most important thing an owner can know before selling: your headline earnings are where a buyer begins, not where they end.

The Listing

Lesson 1: An "add-back" that isn't optional is hiding a real cost.

Here's the mechanic. SDE and EBITDA both add back things like interest and depreciation to show a "cleaner" earnings number. That's standard. But it quietly assumes those costs are somewhat discretionary or one-time.

Now look at this fleet: eight financed vehicles that turn over every two years. For this business, replacing the fleet isn't optional. It's the cost of staying open. The moment the vehicles age out, the service stops. So the depreciation and financing costs being added back aren't noise to strip away; they're a mandatory, recurring, permanent cost of doing business, as real as payroll.

Which means the $583,000 overstates the cash a buyer actually gets to keep. After the business does what it must do, perpetually finance and replace its fleet — the real, spendable earnings are meaningfully lower.

Your move: know your true free cash flow, what's left after the capital you genuinely must spend to keep running. For an asset-heavy business, that's the honest number, and it's the one a sophisticated buyer will value. EBITDA is the starting line, not the finish.

Lesson 2: SDE assumes one owner. This business runs on a family.

Read the team: the owner is the General Manager and one of the two direct salespeople. The spouse does the scheduling. That's two people in three critical roles running the company.

But SDE adds back one owner's compensation. It doesn't fully capture what it will cost a buyer to replace this family's actual labor: hiring a general manager, hiring a scheduler, and covering the owner's personal sales production. That's several market-rate salaries, not a single add-back.

Notice the tell: EBITDA and SDE are listed as the exact same number. Normally SDE is higher, because it adds the owner's pay back on top of EBITDA. When they're identical, it's a hint that the owners' substantial labor isn't being properly priced into the picture at all, the family may be working largely for the profit rather than a market wage, which makes the earnings look better than a staffed-up, arms-length version of the business would.

Your move: if multiple family members work in your business, a buyer will "normalize" your earnings by subtracting a market-rate salary for each role. Run that math on yourself first. Your true, arms-length profit may be lower than your SDE and it is far better to know that now than to discover it mid-deal.

Lesson 3: Aggressive add-backs backfire in diligence.

This is the seller lesson underneath the whole issue. When you sell, you'll be tempted to maximize SDE by adding back every possible expense, because a bigger number times the multiple looks like a bigger price.

Resist it. Serious buyers run what's called a quality-of-earnings review — an independent recasting of your numbers that strips questionable add-backs right back out. Mandatory capital comes back in. Family members get market salaries. One-time "adjustments" get challenged. And the number that survives that review is the number the deal actually gets priced on.

The seller who anchored on an inflated SDE gets re-priced halfway through the deal, usually after they've emotionally committed, told their staff, and turned away other buyers. That's the worst possible moment to lose leverage.

Your move: present clean, conservative, defensible earnings from day one. A number you can prove beats a number you have to defend and then watch collapse. The cleanest books win both the highest price and the smoothest close.

Lesson 4: Selling the city instead of the company.

Half of this listing is about Nashville — its GDP, a new NFL stadium, an MGM casino, corporate relocations, a "$2 billion business travel market." We've seen this move before, and the read is the same: when a listing spends its energy on the metro area's growth, it's often because the city's story is more impressive than the business's own numbers.

A buyer doesn't purchase Nashville's GDP. They purchase this company's trailing earnings.

Your move: your market's growth is context, not value. It might get a buyer interested, but it won't move your price. Sell your boat, not the ocean.

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The through-line.

There's a real, decent business here — over a decade of operation, loyal long-tenured drivers, exclusive airport referrals, genuine repeat corporate clients. Those are durable, valuable things, and they're the reason this could sell well.

But its honest worth rests on what's left after the fleet is perpetually replaced and the owners are actually replaced at market cost, not on a headline SDE with generous add-backs and a glowing city forecast wrapped around it.

That's the lesson for your own exit: buyers don't buy your EBITDA. They buy your EBITDA minus everything you were quietly leaving out. So do that subtraction yourself, years ahead — reduce your capital intensity where you can, put family members on real market salaries so your books tell the truth, and build a number that survives diligence. The most defensible earnings, not the most flattering ones, win the highest price.

To your future success,

Andrew
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