CapEx (Capital Expenditures)

Money spent on long-lived physical assets like vehicles, equipment, and buildouts rather than day-to-day operating costs; maintenance capex keeps the business running as it is, while growth capex pays to expand it.

It is the cost SDE and add-backs quietly leave out: a seller who has deferred replacing an aging fleet shows earnings the business cannot sustain, so a buyer charges maintenance capex as a real annual expense and treats only genuine growth capex as optional.

In numbers: A landscaping company reporting $400k of SDE but averaging $60k a year to replace mowers and trucks is really producing closer to $340k once maintenance capex is charged; a lender that sizes debt on the higher figure leaves the buyer short the day a truck dies.