Which addbacks will a buyer actually accept?

The ones you can prove. Owner salary, owner health cover and a personal vehicle run through the business are routine. Interest, depreciation and amortization are standard. A genuinely one-off legal case or office move is usually fine with documentation. What gets rejected is the pattern of 'one-off' expenses that appear every year, and personal spending nobody can evidence.

Why do addbacks matter so much?

Because they are multiplied. At a 3× multiple, a $12,000 addback a buyer strikes out costs the seller $36,000 of price. This is why diligence spends more time on the addback schedule than on almost anything else in a small deal, and why the schedule should be built from documents rather than memory.

Should I use SDE or EBITDA?

SDE for an owner-operated business, which is most of what sells below a few million dollars. EBITDA once the business runs under management, because a buyer who has to hire a manager cannot also keep the owner's salary as earnings. The difference between the two is exactly that manager's market salary — and this calculator shows both so the gap is visible rather than argued over.

Does one year of figures settle it?

No. Buyers normally look at three years, and often a trailing twelve months as well, because a single strong year proves nothing about the next one. A rising trend supports a higher multiple; a falling one is usually the reason a business is for sale.

SDE Calculator

Seller's discretionary earnings — what a business actually produces for one working owner, once the owner's own pay and every non-recurring cost are added back.

Last reviewed September 9, 2026

The address carries whatever you changed, so anyone opening it sees these numbers. Nothing is saved on our side.

Seller's discretionary earnings

$392,000

What the business produces for one working owner: $180,000 of reported profit plus $212,000 of addbacks. EBITDA — the same business run under management — is $307,000.

Reported profit: $180,000; Before tax
Total addbacks: $212,000
SDE: $392,000; One working owner
EBITDA: $307,000; Under management
Cost of replacing the owner: $85,000
Addbacks as a share: 54%; Of SDE

Where the earnings come from

Every addback is a claim that a buyer will not face this cost. Each one has to be defensible on paper, because each one is worth its size times the multiple.

Reported profit46%$180,000
Owner's compensation31%$120,000
Owner's benefits5%$18,000
Interest6%$22,000
Depreciation9%$35,000
Amortization1%$5,000
One-off expenses3%$12,000
SDE$392,000

At a 3× multiple, a $12,000 addback a buyer rejects costs the seller $36,000 of price. This is why diligence spends more time here than anywhere else in a small deal.

Why the two figures differ

The gap is the market cost of the owner's own job — and it is the single most argued-over number in a small acquisition.

SDE — what one working owner takes: $392,000
Less: market salary for that role: −$85,000
EBITDA — the same business under management: $307,000

A seller quoting SDE and a buyer valuing EBITDA are $85,000 apart before either has mentioned a multiple. At 3× that is $255,000 of price — which is why the first question in any conversation should be which earnings the multiple is quoted against.

How this calculator works

Start at reported profit and add back everything a new owner would not face in the same form.

SDE = profit + owner pay + owner benefits
    + interest + tax
    + depreciation + amortization
    + one-off expenses

Interest comes back because the buyer’s financing will be different. Depreciation and amortization come back because no cash left the business. The owner’s pay comes back because the buyer is the new owner — which is also precisely why EBITDA, shown alongside, subtracts a market salary for that role again.

What is assumed

One working owner. Two owners drawing salaries is a different calculation, and the second salary usually does not come back.
The figures you enter are accurate and provable. Every addback is a claim you will be asked to evidence.
One year. A buyer will want three.

A worked example

A business reporting $180,000 of profit, with an owner paying themselves $120,000.

From $180,000 of reported profit to $392,000 of SDE
Net profit before tax	As reported	$180,000
Owner's compensation	Added back	$120,000
Owner's benefits	Health cover, vehicle, phone	$18,000
Interest	The buyer's financing will differ	$22,000
Depreciation and amortization	No cash left the business	$40,000
One-off expenses	Non-recurring, and provable	$12,000
SDE	At 3× that is $1,176,000 of value	$392,000

The addbacks are $212,000 — larger than the reported profit itself. That is normal for an owner-operated business and it is also why the schedule gets scrutinised: at 3×, every dollar of addback a buyer accepts is three dollars of price.

If it would cost $85,000 to hire someone to do the owner’s job, EBITDA is $307,000 — and a buyer valuing this business at 3× EBITDA rather than 3× SDE is offering $255,000 less for exactly the same company.

Questions people ask

Everything one working owner takes out of the business in a year — reported profit, plus their own salary and benefits, plus interest, tax and non-cash charges that a new owner would face differently or not at all.

Buying a business

NextDSCR CalculatorWhether earnings cover the debt a lender will require

An estimate built from figures you enter. It is not a valuation, an audit, or a substitute for a broker or an accountant who has read the accounts.