Free tool
SDE Add-Back Worksheet
Your tax return understates what the business earns. Work through the add-backs line by line and you'll have the number a buyer prices on.
Bottom-line profit from last year's accounts, before any add-backs.
What the business paid you personally over the year.
Health insurance, retirement contributions, payroll tax on your own pay.
Vehicle, phone, travel, family on payroll. Only what you can evidence.
A lawsuit, a move, a failed hire — costs that won't repeat.
Straight from your profit and loss statement.
Interest on business borrowing. The buyer's financing will be different.
Positive if you charge the business above market rent, negative if below.
Seller's discretionary earnings
$274,000
$154,000 of add-backs on top of $120,000 net profit
What that supports
Where you land in that spread depends on your industry, how much revenue repeats and how much the business depends on you.
Now put it against your industry's multiple — get your value range.
Common questions
What is an add-back?
An expense in your accounts that a new owner would not carry forward — your own salary, personal costs run through the business, or a one-off legal bill. Adding them back shows the true earning power of the business.
Which add-backs will a buyer accept?
Ones you can prove with an invoice or a payroll record. Owner compensation, owner benefits, documented one-time costs, depreciation and interest are standard. Vague 'miscellaneous' add-backs get struck out in diligence.
Should I add back a second owner's salary?
Only if that person is leaving and the work goes with them. If a buyer must hire a replacement, the cost stays in and the salary is not an add-back.
What is the rent adjustment for?
If you own the building and charge the business above or below market rent, buyers normalise it. Enter a positive number if you overcharge the business, a negative one if you undercharge it.
What multiple applies to SDE?
Most owner-run businesses trade between 2 and 4 times SDE, higher where revenue recurs and the business runs without the owner. Your industry calculator shows the current range.