Buyer & Seller Tool
The gap between what a seller claims as SDE and what a buyer accepts is where most Australian business sale negotiations play out. This worksheet walks from your reported before-tax profit through every common add-back — showing the seller's argument and the buyer's likely counter side by side. Know the gap before you sit down.
Sellers: use this to anticipate scrutiny and prepare documentation. Buyers: use this to stress-test a broker's stated SDE before you make an offer.
Step 1 — Starting point
Use the net profit before income tax from your most recent full-year P&L. Do not use EBITDA — we'll build up to it.
Step 2 — Add-backs
Tick each add-back that applies and enter the annual amount. The table shows how a seller typically presents each item — and how a buyer is likely to respond.
A buyer would not pay themselves the same amount — add back in full to show true earnings.
Accepted, but buyer will benchmark against market replacement cost for a salaried GM. If owner drew $300K but a GM costs $150K, buyer argues $150K add-back.
Discretionary — buyer can choose their own super arrangements.
Generally accepted. May note they'll contribute 11% super on a replacement manager salary.
Family members do real work — salary is legitimate. Add back if above market rate.
Scrutinises heavily. Will ask for evidence of work performed. If family member won't stay post-sale, treats as recurring cost. May apply 30–50% haircut.
Personal policy paid through the business. Pure add-back.
Accepted — clearly personal, buyer will arrange their own.
Significant personal use of the company vehicle. Full running costs are an add-back.
Accepts a portion, but typically wants a logbook showing business/personal split. Without one, may discount 40–60% of the claimed amount.
Personal phones / laptops run through the business. Buyer won't need these.
Accepts most of it. May retain a portion for a replacement manager's phone plan.
Holidays or personal trips coded as business travel. Pure add-back.
Accepts clearly personal items, but scrutinises conferences, "business" trips. Wants to see documentation. May discount 30–50% without receipts.
Personal dining, sport, events run through the P&L. Not an ongoing business cost.
Will accept the clearly personal portion, but notes some client entertainment is a real cost. May accept 60–70% of the claimed amount.
Portion of rent, utilities, internet claimed as home office. Not needed by a buyer.
Accepted — a buyer operating from commercial premises won't have this cost.
Golf club, gym, industry body memberships claimed through the business.
Accepted for clearly personal items. May retain industry association memberships as a legitimate business cost.
Non-cash accounting charge. Does not affect cash the owner receives. Standard add-back.
Accepts the add-back but immediately asks: "What is the annual capex required to maintain the asset base?" If capex ≈ depreciation, the add-back is largely offset in a buyer's analysis.
Non-cash charge against intangible assets (IP, goodwill, software). No cash impact.
Generally accepted as a full add-back. Will ask if the underlying intangible still has economic value.
A specific legal matter that is now resolved. Will not recur under new ownership.
Asks for documentation that the matter is closed. If it relates to an ongoing risk (employee dispute, IP claim), may treat as contingent liability and deduct from purchase price rather than add-back.
One-time cost for a restructure, audit, or preparing for sale. Not part of recurring overhead.
Accepts the above-normal portion. Notes that compliance accounting is a real ongoing cost — will want to see normalised accounting fees separately.
A specific project — IT implementation, strategy, rebrand — that is complete.
Wants to understand what the consulting achieved. If the project will need maintenance or ongoing spend, may not accept as fully one-off.
One-time cost of exiting a staff member. Won't happen again.
Accepted as one-off. However, will note if the role was refilled (suggesting it was a restructure cost, not a saving).
Exceptional costs from the pandemic period — PPE, compliance, lost revenue. Clearly non-recurring.
Accepts for clearly pandemic-specific costs in 2020–2022. Will question anything post-2022.
A major equipment purchase or fit-out that won't recur. Should be added back to show true earnings.
This is the most debated add-back. Buyer argues: "Every business has periodic capex — why is yours special?" May accept 50–70% if the item is clearly exceptional and has a long service life.
A specific campaign or rebrand project, not part of the annual marketing budget.
Accepts if clearly separated from ongoing marketing spend. Will want to see the normal marketing budget to confirm the add-back is genuinely incremental.
If the acquisition is structured as an asset sale with debt retired at settlement, interest won't recur for the buyer.
Accepted if debt doesn't transfer. However, if buyer needs to borrow to fund the purchase, their own interest cost replaces this — net effect for the buyer may be zero.
Financing cost for equipment. Buyer may refinance or not use hire purchase.
Partially accepted. If the lease transfers with the business, the cost continues. Buyer will examine lease terms before agreeing.
Rent paid to an entity you own (SMSF, family trust) above what an arm's-length landlord would charge.
Will want an independent rental valuation. If rent is genuinely above market, the delta is a fair add-back. If the landlord entity is sold with the business, the add-back is irrelevant.
If paying below-market rent from a related-party landlord, this benefit won't continue for a buyer. Deduct the difference.
Strongly agrees — this is a cost the buyer will face that's currently hidden. Will insist on deducting the market-rate rental shortfall.
Owner's personal giving channelled through the business. A buyer won't continue this.
Accepted — clearly discretionary. Notes that some community giving may be important for customer relationships in certain industries.
A Normalised Earnings Schedule (also called an Adjusted EBITDA or SDE bridge) is a formal document prepared by an accountant that shows the journey from reported profit to seller's discretionary earnings. It lists every add-back with a supporting explanation and, ideally, documentary evidence. In Australian business sales, a properly prepared schedule significantly reduces due diligence friction and supports the asking price.
The most contested add-backs in Australian SMB negotiations are: (1) personal vehicle expenses without an ATO-compliant logbook, (2) family member wages where the role and remuneration can't be evidenced, (3) one-off capex that buyers argue is recurring, and (4) above-market owner salaries where there's no market benchmark for the role. Each of these is winnable — but requires preparation, not assertion.
Buyers discount add-backs where the evidence is weak, the item might recur, or the seller's claim is aggressive relative to ATO-accepted norms. A buyer paying 3.5× SDE will scrutinise add-backs more than one paying 2.5× — because a $50K contested add-back is worth $175K in purchase price at 3.5×. The larger the multiple, the more incentive both sides have to fight over each line.
Yes — ideally 12 months before listing. Having your accountant prepare a clean Normalised Earnings Schedule before engaging a broker (a) prevents the broker from undervaluing the business, (b) reduces due diligence time, and (c) signals to buyers that the financials are credible. Surprises in due diligence are the most common cause of deal collapse or price renegotiation.
When ThatDeal makes a broker call on your behalf, one of our standard questions is "What are the major add-backs in the normalised P&L, and are they documented?" The answer tells us immediately whether the stated SDE is credible or inflated — and flags this in your intelligence report as a green, yellow, or red flag. See how our intelligence reports work →