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Add-Backs

Expenses added back to net income when calculating SDE or adjusted EBITDA because they wouldn't exist under new ownership. Legitimate add-backs include owner perks, one-time legal fees, and above-market rent to a related party. Inflated add-backs are the #1 deal-killer in small business sales.

Where This Matters

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Exit Planning

Everything business owners need to know about selling, exiting, or transitioning out of their company — from valuation to tax strategy to deal structure.

Related Terms

Seller's Discretionary Earnings (SDE)EBITDA MultipleQuality of Earnings (QoE)

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Enterprise Value (EV)Seller's Discretionary Earnings (SDE)EBITDA MultipleQuality of Earnings (QoE)Due DiligenceLetter of Intent (LOI)Holdback (Escrow)Earn-OutAsset SaleStock Sale (Equity Sale)GoodwillPersonal GoodwillCommunity PropertySeparate PropertyPereira MethodVan Camp MethodTransmutationBuy-Sell AgreementShotgun Clause (Russian Roulette Clause)Right of First Refusal (ROFR)View all →