What counts as a one-off cost?
Something that happened once, will not recur under new ownership, and has a document behind it. Three years of 'one-offs' are operating costs with an optimistic label.
A cost that occurred once, will not recur under new ownership, and has documentary evidence behind it. All three conditions, not two.
Usually accepted
- A legal settlement or dispute that has concluded
- Relocation of premises
- A product launch that failed and will not be repeated
- Redundancy costs from a restructuring already completed
- Professional fees for a transaction that did not proceed
- Damage or loss not covered by insurance
Usually rejected
Recruitment costs, which recur in any business with staff. Marketing campaigns, unless genuinely exceptional in scale and clearly non-repeating. Bad debt, which is a cost of trading. Software implementation, if you implement software regularly. And anything appearing in more than one of the last three years.
What makes one survive due diligence
Evidence, not argument. An invoice, a settlement agreement, a board minute. An add-back supported by a document is accepted; an add-back supported by an explanation is negotiated, and usually lost.
How EBITDA affects your valuation covers the full normalisation; common valuation mistakes covers what happens when one-offs only appear in the exit year.