SDE add-back worksheet
SDE Calculator
Seller’s Discretionary Earnings, worked out the way a broker or SBA lender would: your pre-tax profit, then every add-back on its own line — including the adjustments that cut the other way. Free, no sign-up, printable.
Start — the bottom line
From your most recent tax return or P&L, before income taxes. Losses are allowed — enter a negative number.
Owner compensation & benefits
Everything ONE full-time owner-operator takes out of the business. If several owners work in it, this section covers one — the others are handled under normalization below.
W-2 wages, guaranteed payments, or draws for one full-time owner.
The employer-side payroll taxes the business paid on the owner's wages.
Premiums and plan contributions the business paid for the owner personally.
Financing & non-cash expenses
A buyer brings their own financing and their own asset basis, so these are added back regardless of how you financed the business.
Interest on business loans, lines of credit, and credit cards.
From the tax return or P&L.
Often listed with depreciation; enter it here if it's a separate line.
Personal expenses run through the business
Real spending, but a buyer wouldn't have to spend it. Every dollar here should be provable — buyers and lenders discount add-backs they can't verify.
Lease or payments, fuel, and insurance for a vehicle that isn't genuinely needed by the business.
Trips and meals that were personal, booked through the business.
Family phone plans, personal insurance, subscriptions, memberships — anything non-business.
One-time items
Things that genuinely won't repeat. “One-time” expenses that show up every year aren't one-time.
A lawsuit, a flood repair, a one-off equipment move or website rebuild.
A grant, an insurance payout, a one-off asset sale. Subtracted — a buyer can't count on it.
Normalization adjustments
Restating costs to what a buyer would actually face. These can raise or lower SDE — honest worksheets show both directions.
Paying above-market rent (e.g. to a related landlord)? Enter the annual excess as a positive number. Paying below market — say you own the building — enter the shortfall as a negative number.
Family paid above market for their role: enter the excess as positive. Family working unpaid or underpaid: enter what it would cost to replace them as a negative number.
Only ONE owner's compensation is added back. If a second owner works in the business, subtract what it would cost to hire someone to do their job.
Your SDE
Enter your profit and work down the add-backs — the running total and breakdown appear here.
Every add-back should be provable from tax returns, payroll records, or receipts — buyers and lenders discount what can’t be verified. Informational only, not professional advice.
Methodology
This worksheet follows the IBBA’s published definition of Seller’s Discretionary Earnings: the earnings of a business before income taxes, interest, depreciation and amortization, non-operating and non-recurring items, and one owner’s entire compensation — including benefits and any personal expenses paid by the business. The line items are grouped into 5 sections: owner compensation & benefits; financing & non-cash expenses; personal expenses run through the business; one-time items; normalization adjustments.
Two rules in the definition do the most work. First, only one full-time owner-operator’s compensation is added back — additional working owners are restated at what it would cost to replace them. Second, normalization runs in both directions: below-market rent and unpaid family labor reduce SDE, because the buyer will face those costs at market rates. A worksheet that only ever adds is a sales pitch, not a valuation input.
SDE is the earnings figure that sold-business multiples are quoted against. Once you have it, the valuation calculator applies your industry’s published multiple — the “apply an industry multiple” button carries your result over.
Limits
- Categorizing add-backs involves judgment — whether an expense is genuinely one-time or personal is ultimately argued between buyer, seller, and lender. This worksheet structures the argument; it doesn’t settle it.
- Every figure should trace to a tax return, P&L line, payroll record, or receipt. Add-backs without documentation typically get discounted to zero in diligence.
- The one-owner convention means SDE overstates what a passive investor would earn — it’s a measure for owner-operators, by design.
Source: International Business Brokers Association (IBBA), Glossary of Business Brokerage Terms
Last reviewed: July 2026. This calculator is informational only and is not professional, financial, or valuation advice.
Frequently asked questions
What counts as a legitimate add-back?
An expense the business paid that a new owner genuinely wouldn't have to: one owner's compensation and benefits, interest, depreciation and amortization, truly one-time costs, and personal spending run through the business. The test buyers and lenders apply is provability — an add-back you can point to on a tax return, payroll record, or receipt gets counted; one you can only assert gets discounted or thrown out.
Can I add back my own salary and a manager's salary?
Only one full-time owner-operator's compensation is added back under the standard SDE definition. A manager's salary is a real operating cost the buyer inherits, so it stays in. If a second owner also works in the business, their compensation is added back too, but what it would cost to replace them with an employee is subtracted — the worksheet has a line for exactly that.
Why do rent and family wages get adjusted?
Because the buyer faces market costs, not your arrangements. If the business pays above-market rent to a related landlord, the excess is added back; if you own the building and charge yourself below-market rent, the shortfall is subtracted. Family members paid above market for their role are an add-back; family working unpaid would have to be replaced at real wages, which is subtracted. Honest worksheets adjust in both directions.
How is SDE different from EBITDA?
EBITDA is earnings before interest, taxes, depreciation, and amortization — it assumes management is a paid expense that stays. SDE goes one step further and adds back one owner's entire compensation, because in an owner-operated business the buyer typically replaces the owner. Main Street businesses are priced on SDE; larger businesses with management in place are priced on EBITDA.
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