Ask most MSP owners what their EBITDA is, and you’ll get a confident number. Ask George Sierchio how often that number is actually right, and he’ll tell you: not as often as you’d think. People swing both directions — some are quietly shortchanging themselves, others are convinced they’re worth more than the math will ever support. Either way, the number they’ve been carrying around for five years usually isn’t the number a buyer sees.
This episode digs into why. George walks through how EBITDA gets built, where it quietly drifts from reality, and the handful of adjustments — add-backs, recurring revenue quality, deal structure — that decide what a buyer will actually pay, not what a spreadsheet says you’re owed.
Short version: knowing your real number isn’t the finish line. It’s the starting line.
Watch the episode and be sure to subscribe: Watch Cogent Conversations Episode 16
Key takeaways from this episode
- Your EBITDA probably isn’t what you think it is. George sees it constantly: owners who’ve spent years running with a number that keeps quietly changing on them, in both directions. Getting an outside, accurate read isn’t optional — it’s the first real step in knowing what you’re working with.
- EBITDA is a shorthand, not gospel. It was never a GAAP principle — it’s a comparison tool people invented to size up companies against each other. Most of the time it’s a solid proxy for free cash flow, but a buyer’s diligence team will dig past the shorthand to the real story underneath.
- Watch the trailing-twelve cherry-pick. A great trailing-twelve months can flatter a number that’s about to revert to a much more normal one. Buyers price the pattern, not the best month you’ve ever had.
- Every add-back has to survive a real test. Taking out “Bob the engineer’s” salary only works if you’re genuinely never rehiring Bob. The moment the buyer asks who’s doing that job going forward, the add-back has to hold up — or it comes right back out of the number.
- Running lean can quietly cost you at the table. Skipping sales and marketing hires to pocket an extra $200K a year looks great on your own books. To a buyer who has to build what you didn’t, that’s an adjustment working against you, not for you.
- Recurring revenue’s real value is in how sticky it is — and the deal structure follows that risk. A verbal agreement isn’t the same as a three-year contract renewed twice. The steadier and more transferable the revenue, the less a buyer needs to protect themselves with earn-outs and retention structure — and the more of the price shows up at closing.
Here’s the honest exercise worth doing before a buyer ever runs their own numbers: get an outside, accurate read on your adjusted EBITDA, then look hard at which parts of your revenue would survive you walking out the door tomorrow. Most owners have a rough sense of both. Fewer have actually pressure-tested them.
If you want a clear-eyed read on where your real number stands — and what would move it before you’re mid-deal — that’s exactly the conversation we like having early. We’re happy to help you think it through anytime.
