Add-backs
Expenses on your books that don't really belong to the business — added back to show your true earnings.
Add-backs are expenses your business reports on its tax return that wouldn't continue under a new owner. The personal vehicle the business pays for. Your spouse's salary if they don't really work in the business. The country club membership filed as "business development." A one-time legal bill from a lawsuit that's resolved. Each one gets added back to your reported profit to show what the business actually earns. Done right, add-backs are how a business with $200K in tax-return profit shows $400K in real SDE.
Add-backs are how a business reports lower profit on its tax return than it actually earns — and how that real earning power gets shown to a buyer.
Buyers sort add-backs into three buckets in their head: clean, gray, and disallowed.
Find out what a buyer would see in your business — before you talk to one.
The Exit Desk free assessment takes 2 minutes. If you'd rather see what a full report looks like first, read a sample.
