Glossary / Add-back
Add-back
An add-back is an expense added back to profit when calculating SDE because it is the owner’s pay, a one-off, or a personal cost the buyer will not inherit.
Add-backs are legitimate — an owner’s salary, a one-time legal bill, a personal phone on the company card — and they are how SDE reflects the real cash flow. They are also the most negotiated, and most inflated, part of a listing.
The test for each add-back is simple: will the buyer actually avoid this cost? A “discretionary” marketing spend the business needs to hold its traffic is not an add-back, whatever the listing says.
Related terms
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