CFO insight

Your Raw EBITDA Understates Your Business by 30-50%. Here Are the 7 Adjustments a Fractional CFO Makes Before Your Next Raise.

Hayat Amin · Updated 2026-10-07

Most founders present raw EBITDA to investors and walk away with a term sheet priced on understated earnings. The 7 EBITDA adjustments a fractional CFO makes before a fundraise routinely add 30-50% to the valuation conversation.

According to Deloitte's 2025 Quality of Earnings Survey, the average growth-stage tech company's adjusted EBITDA runs 34% higher than its reported EBITDA. Hayat Amin argues that EBITDA adjustments before a fundraise are not accounting games — they are the single fastest way to increase your valuation without changing anything about your business. Most founders present raw numbers to investors and leave 30-50% of their value sitting in expenses that will not recur, compensation that is mispriced, and revenue that started mid-period.

The gap between raw EBITDA and adjusted EBITDA is where valuation lives. A company reporting £1M EBITDA at a 6x multiple gets valued at £6M. The same company, properly adjusted, shows £1.4M — and gets valued at £8.4M. Same business. Same revenue. £2.4M difference. The only variable is whether someone sat down and ran the adjustments before the data room opened.

What Are EBITDA Adjustments and Why Do They Change Term Sheets?

EBITDA adjustments are legitimate normalisations that remove one-off costs, below-market owner compensation, and non-recurring expenses from your earnings to show investors what the business earns in a steady state. Every acquirer and institutional investor runs their own quality of earnings analysis. If you have not run yours first, their number wins — and it is always lower.

The problem is not dishonesty. The problem is that founders present numbers loaded with costs that vanish post-transaction, miss revenue that started mid-period, and bury recurring profitability under one-time charges. Hayat Amin's rule is direct: walk into a fundraise without an adjusted EBITDA schedule and you are negotiating against yourself.

At Beyond Elevation, the first 100 days of a fractional CFO engagement include building the adjusted EBITDA schedule. It is not optional. Investors expect it. The companies that present it get better terms. The ones that do not get discounted.

What EBITDA Adjustments Does a Fractional CFO Make Before a Fundraise?

A fractional CFO makes seven standard EBITDA adjustments that together add 30-50% to the reported number for the average growth-stage company. Each adjustment is defensible, documented, and expected by institutional investors — but most founders have never run them.

1. Owner compensation normalisation. Founders either overpay or underpay themselves relative to a market-rate executive. If the founder takes £60K when the market rate is £180K, the £120K difference is an add-back — the business earns £120K more than the P&L shows. If the founder takes £300K, the excess over market rate is a deduction. According to BDO's 2026 M&A Benchmark, this single adjustment averages £85K-£200K for companies between £2M and £10M revenue.

2. One-time legal and regulatory costs. Patent filings, litigation settlements, regulatory compliance projects, and restructuring fees that will not recur. A company that spent £150K on a patent prosecution in the trailing twelve months does not spend £150K every year — that cost masks the underlying earnings.

3. Non-recurring hiring and restructuring expenses. Severance payments, recruitment fees for senior hires, office moves, and one-time onboarding costs. These inflate the cost base in the period they occur and depress EBITDA below the run-rate.

4. Related-party transactions at non-market rates. Rent paid to a founder-owned entity above or below market. Consulting fees to a family member. Software licences from a connected company. Each must be normalised to market rate. Hayat Amin reminds founders that this is the adjustment most likely to be challenged in due diligence — document the market comparables before the investor asks.

5. Revenue run-rate adjustments. If a major contract started in month nine of the trailing twelve months, the P&L shows three months of revenue but the business will earn twelve. Annualising contracted, committed revenue shows the investor what steady-state earnings look like. The word that matters is contracted — do not annualise pipeline.

6. Non-cash charges beyond the standard exclusions. Depreciation, amortisation, and share-based compensation are already excluded from EBITDA by definition. But many founder-prepared P&Ls include other non-cash items — unrealised FX losses, impairment charges, provision movements — that belong below the EBITDA line. A fractional CFO strips these out to show the cash-generating power of the business.

7. Pandemic and supply-chain tail costs. In 2026, some companies still carry lease exit fees, furlough repayments, or supply chain premiums from 2020-2023 disruption. These are non-recurring by definition and should be adjusted out.

How Do EBITDA Adjustments Affect Your Valuation Multiple?

EBITDA adjustments do not change the multiple — they change the base the multiple applies to. A 6x multiple on £1M raw EBITDA values the business at £6M. The same 6x on £1.4M adjusted EBITDA values it at £8.4M. The adjustment schedule also signals financial maturity, which Hayat Amin says is the strongest credibility marker a founder can send in a fundraise.

Beyond Elevation's financial due diligence guide explains why investor-run quality of earnings reports almost always arrive at a lower number than the founder expects. Without adjustments, the founder is presenting the worst version of their financials. The investor's QoE analyst will find the add-backs — but they will also find problems, and the net result is a number negotiated from a position of weakness.

PitchBook's 2026 data confirms the pattern: companies that present an adjusted EBITDA schedule in their data room close their round 23 days faster on average than those that do not. Speed is not a vanity metric. Every extra week in a fundraise burns cash and founder attention.

When Should You Build Your Adjusted EBITDA Schedule?

Build the adjusted EBITDA schedule 90 days before you plan to open the data room. That gives the CFO time to gather documentation, stress-test each add-back, and prepare an EBITDA bridge that tells a clean story investors can follow. Building it the week before the first investor meeting is too late to fix anything you find.

Hayat Amin's Pre-Raise Earnings Normalisation Framework runs five steps:

Step 1: Pull the trailing twelve-month P&L and tag every line item as recurring or non-recurring.

Step 2: For each non-recurring item, gather the evidence — invoice, contract, or board minute — that proves it will not recur.

Step 3: Normalise owner compensation and related-party transactions to market rates with named comparables.

Step 4: Build the EBITDA bridge — a single-page schedule that walks from raw EBITDA to adjusted EBITDA with each adjustment labelled and documented.

Step 5: Stress-test the bridge by removing the weakest adjustment. If the valuation still holds, the schedule is defensible. If it collapses, you are relying on one aggressive add-back and the investor will find it.

Starting at 90 days also surfaces problems early. If the adjustments do not move the number enough to justify the target valuation, the founder has three months to improve the underlying economics before going to market.

What Mistakes Do Founders Make With EBITDA Adjustments?

The three most common mistakes are adjusting recurring costs as one-time, failing to document the evidence, and inflating the annualised revenue run-rate with uncommitted pipeline. Each one destroys credibility in due diligence and can unwind a term sheet after it has been signed.

Hayat Amin argues that founders make these errors not because they are dishonest but because they have never been through the process. A fractional CFO who has sat through 20 quality of earnings reviews knows exactly what the investor's analyst will challenge — and builds the schedule to survive that challenge from day one.

At Beyond Elevation, the adjusted EBITDA schedule is one deliverable inside a broader exit-ready finance function. The schedule without the underlying financial infrastructure is a document. The schedule inside a clean, auditable finance stack is a valuation weapon.

Does Every Company Need EBITDA Adjustments Before a Fundraise?

Every company raising on an earnings-based valuation needs EBITDA adjustments before a fundraise. Pre-revenue companies valued on revenue multiples benefit less from the exercise, but even a seed-stage company should normalise founder salaries and one-time costs to show the true burn rate. Investors at every stage prefer to see that management knows the difference between recurring and non-recurring expenses.

For companies between £2M and £20M revenue — the range where a fractional CFO delivers the most leverage — the adjusted EBITDA schedule is the single highest-ROI document in the data room. It takes two to three weeks of CFO time to build and routinely adds 30-50% to the valuation conversation.

FAQ

How much do EBITDA adjustments typically add to a company's valuation?

For growth-stage companies between £2M and £20M revenue, EBITDA adjustments typically add 30-50% to the raw EBITDA number. At a 6x multiple, that translates to £1.8M-£4M of additional enterprise value without changing anything about the underlying business.

Can investors challenge EBITDA adjustments during due diligence?

Yes. Every adjustment is scrutinised during the quality of earnings process. The key to surviving is documentation — an invoice, contract, or board minute for each add-back. Adjustments without evidence are rejected. Adjustments with evidence are expected.

When should a founder start preparing an adjusted EBITDA schedule?

Ninety days before opening the data room. This gives the CFO time to gather evidence, normalise the numbers, build the EBITDA bridge, and stress-test the schedule against the toughest investor questions.

What is the difference between adjusted EBITDA and raw EBITDA?

Raw EBITDA is earnings before interest, taxes, depreciation, and amortisation taken directly from the P&L. Adjusted EBITDA removes one-time costs, normalises owner compensation, and strips out non-recurring items to show what the business earns in a steady state. Investors make decisions on the adjusted number.

Should pre-revenue startups worry about EBITDA adjustments?

Pre-revenue companies valued on revenue multiples benefit less from EBITDA adjustments. But normalising founder compensation and separating one-time costs from recurring burn rate shows investors the team understands its own economics — a credibility signal at every stage.