Addback
An addback is an expense added back to reported profit when calculating what a business really earns for a buyer: SDE or adjusted EBITDA. Classic addbacks include the owner's salary, personal expenses run through the business, one-time costs like a lawsuit or a rebrand, and above-market rent paid to yourself. Every dollar of defensible addback raises the sale price by the full multiple, which is why buyers challenge them and why documentation decides which ones survive.
The math is why addbacks matter so much. Suppose your P&L shows $300,000 of net profit, and you also paid yourself an $80,000 salary and ran $15,000 of personal travel through the business. Properly documented, those become addbacks, and the earnings a buyer prices is $395,000. At a 3.5x multiple, that's $332,500 of additional sale price from paperwork. Undocumented, a diligence team strikes them, and the same business sells for a third less.
"Defensible" is the operative word. An addback survives when it's tagged in the books as it happens, with the invoice attached, not reconstructed from memory two weeks before a letter of intent. That's why we maintain a running addback schedule inside every set of books we keep, one of the habits that makes books exit-grade. The full buyer's-eye view is in our quality of earnings guide, and the schedule itself is standard in monthly bookkeeping.
Where this shows up in our work
This isn’t textbook material for us; it’s the day-to-day of keeping seller books right. See how we handle it in practice:
Monthly Ecommerce Bookkeeping→