Financial Analysis
Add-back
An expense added to reported net income to arrive at SDE or adjusted EBITDA, representing a cost that is personal, non-cash, or non-recurring in nature.
An expense or charge added to a business's reported net income when calculating Seller's Discretionary Earnings (SDE) or adjusted EBITDA. Add-backs fall into three categories: owner-personal expenses (compensation, personal vehicles, personal insurance), non-cash charges (depreciation, amortization), and non-recurring costs (one-time legal fees, casualty losses). Each add-back must be documented, genuinely discretionary or non-operational, and accurately valued. Unsupported, recurring, or inflated add-backs are a common source of disputed valuation in due diligence. (Also see SDE, Adjusted EBITDA, QoE Report.)