Add-backs

Expenses added back to profit when calculating SDE because a new owner would not incur them: owner perks, one-time costs, and discretionary spending. Only provable add-backs count.

When a business is valued on SDE, the seller adjusts reported profit upward for costs that were really owner benefit or genuine one-offs: the owner's vehicle, personal travel through the business, a flood repair, a one-time legal dispute.

The rule buyers apply is simple: an add-back must be provable and genuinely non-recurring. Equipment that "one-off" breaks every year is a cost. A relative on payroll who does real work is a cost the new owner inherits. And an add-back with no paper trail will be struck in due diligence.

The practical lesson is to document add-backs as they happen, not reconstruct them the year you sell. That habit is part of keeping clean books.