SMB Tools / SDE & Add-Back Calculator
What the business really earns
A reported bottom line understates what an owner takes home. Add back the owner's pay, the non-cash charges, and the one-offs to get Seller's Discretionary Earnings, the number a sale is actually priced on.
Reported profit
Annual revenue
$
Pre-tax net profit
$
Owner add-backs
Owner's compensation
$
Owner's benefits & payroll tax
$
Personal / discretionary expenses
$
Accounting add-backs
Interest expense
$
Depreciation & amortization
$
One-time / non-recurring
$
Other defensible add-backs
$
Valuation preview
SDE multiple
x
Estimated value$550,000
Seller’s Discretionary Earnings
$220,000
at 2.5x, roughly $440,000 to $660,000
SDE as a share of revenue24%
Across the 156 businesses in the smbnest index the median owner keeps 21% of revenue; this is in the normal range. Add-backs are 64% of SDE; above about 30%, buyers and lenders start discounting them, so keep the receipts for each one.
- Reported profit
- $80,000
- Total add-backs
- $140,000
- Value at 2.5x
- $550,000
Reported net profit$80,000
Owner’s compensation+$90,000
Owner’s benefits & payroll tax+$12,000
Personal / discretionary+$10,000
Interest+$8,000
Depreciation & amortization+$15,000
One-time + other+$5,000
SDE$220,000
A planning estimate, not a valuation. Add-backs must be documented and defensible. A buyer and their lender will scrutinize them. Refine the value in the valuation calculator →