Addbacks

Addbacks — the adjustments between a business’s book profit and its claimed SDE: owner’s salary (legitimate), personal expenses run through the business (legitimate if truly personal), “one-time” costs (legitimate only if they truly never recur). The scrub also hunts negative addbacks nobody volunteers — unpaid family labor, below-market rent from a relative that ends at closing. Demand the schedule, challenge every line, and rebuild SDE from bank-deposit evidence; the difference between claimed and scrubbed SDE, times the multiple, is usually the entire negotiation.

First used in: 4.2 · Buying cash flow: acquisition I