The Myth:
You can simply add back the owner’s salary to cash flow to boost valuation.

The Reality:
The business still needs someone to perform the owner’s role. In a fair market transaction, a buyer will need to hire (or be) a replacement. Owner’s salary can’t just be ignored — it must be normalized to a market-based replacement salary.

Why It Matters:
Inflating cash flow by ignoring replacement compensation can overstate value and mislead lenders or buyers.

Practical Tip:
Always adjust for reasonable replacement wages when recasting cash flow — using real market data, not assumptions.