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Add-back checker for a business P&L

Sellers often add personal costs back to net income to create SDE. Some of those items are normal. Some need invoices. Some should never inflate the price. This checker helps you sort the list and recast the cash flow.

Add-back lines

How to use this checker

  1. Enter net income from the P&L, and the seller’s claimed SDE if you have it.
  2. List each add-back. The page will suggest a mark from the description; you can override it.
  3. Treat owner pay, depreciation, and clearly personal benefits you will not keep as “legit” only when you can still prove them.
  4. Mark recurring “one-time” repairs, vague marketing cuts, and home-office charges as “needs proof.”
  5. Mark tuition, family lifestyle costs, and personal trips as “red flag” and leave them out of recast SDE.

The sample lines are an illustration (a truck lease, family health, a “one-time” repair, tuition, and depreciation). Replace them with the seller’s actual schedule. Recast SDE here is net income plus the items you marked legit. It is not an appraisal.

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FAQ

What is an add-back?

An expense the seller asks you to add back to net income when you measure cash flow, because it is the owner’s personal benefit or a non-cash item such as depreciation. The buyer will only keep the cash flow if that expense really disappears after close.

Why isn’t depreciation always “free cash”?

It is a normal SDE add-back, but trucks, machines, and computers still wear out. Look at real capital spending over the last three years and what has to be replaced next.

Should I add back the owner’s salary if it is already zero?

No. You cannot add back a wage that was never taken. You still have to pay yourself or a manager, which is why the owner-pay and DSCR calculators subtract a market wage after SDE is recast.

Do I need invoices for “legit” items too?

Yes. The mark is a starting point. A CPA will still want support for owner pay, insurance, and depreciation.

Disclaimer. Deal Check is not financial, legal, or accounting advice. These pages and calculators are educational planning tools and can miss context. Verify every number with a CPA and a business broker, and do your own due diligence before making an offer.