SDE and add-backs calculator
Enter the net profit from the seller's tax return or P&L, then each add-back the seller claims. Rate every add-back by how well it's documented. The calculator shows seller's discretionary earnings three ways: everything the seller claims, solid add-backs only, and solid plus shaky. Nothing you type leaves your browser.
Other add-backs claimed by the seller
Example values are filled in so you can see how it works. They're an illustration, not a real business. Interest and depreciation are treated as solid because they come straight off the return; you still need a reserve for replacing equipment.
How to rate an add-back
| Rating | Means | Example |
|---|---|---|
| Solid | Documented in the books and clearly won't continue under you. | Interest on a loan the seller pays off at closing; the owner's health insurance shown on payroll records. |
| Shaky | Plausible, but the evidence is thin or the cost may come back. | A "one-time" repair when similar repairs show up most years; a vehicle with no mileage log. |
| Unsupported | No document supports it, or it isn't on the tax return. | Cash sales the seller says weren't reported; "my nephew didn't really work here". |
Want to see what a lender would think of the debt at a given asking price? Take your solid-only SDE to the SBA debt service coverage calculator. For the reasoning behind each add-back, read add-backs and seller's discretionary earnings.
Frequently asked questions
What is the formula for seller's discretionary earnings?
SDE = net profit before taxes + one owner's salary and payroll taxes + owner benefits + interest + depreciation and amortization + discretionary and non-recurring expenses that the next owner won't have. See our SDE formula guide for worked examples.
Why does the calculator show three SDE figures?
Because the add-backs aren't equally believable. Solid add-backs are documented and clearly won't continue. Shaky ones might be real but need more evidence. Unsupported ones have no evidence. Starting from the solid-only figure keeps you from paying for earnings you can't prove.
What's the difference between SDE and EBITDA here?
SDE includes the pay of one working owner. EBITDA assumes a paid manager runs the business, so it subtracts a market-rate salary. Enter a manager salary to see the EBITDA figure.
Does this calculator value the business?
No. It only calculates earnings from the numbers you enter. It doesn't apply a multiple or produce a value or price.
This calculator runs in your browser; nothing you type is sent anywhere. It is an educational tool, not a valuation, appraisal, lending decision or advice. Lenders apply their own adjustments and policies.