Rebuild the Earnings
Judge the Schedule Line by Line
A listing quotes the seller's number, and the band you price it against is only as good as the earnings under it. Take the schedule apart: what stands, what is waiting on a document, what comes back out, and what the schedule never listed at all. Then carry the defensible figure into the Business Valuation Calculator.
What the Seller Claims
VerdictStands
An add-back only if you do the owner's job. Hire someone to do it and the market wage for the role replaces the salary you just added back.
VerdictStands
The seller's debt does not come with the business. Your own financing replaces it, which is what the debt-service math downstream is for.
VerdictStands
A non-cash charge, so it comes back out of the accounting and into the cash.
What it stands for does not come back: the trucks and equipment still wear out. Put the replacement spend in the second half or you have bought the depreciation and not the truck.
The test is a document showing the event, not the word the seller wrote beside it. A one-time expense in three consecutive years is a line item.
Every personal line has to be nameable. A round number labeled owner perks is a figure the seller chose rather than one the books produced.
Enter an amount and this line asks how it reads.
Only the part above what the job costs at market is earnings. The market part is a hire you inherit, whoever is currently doing it.
Enter an amount and this line asks how it reads.
Split it. The share that was genuinely personal is earnings; the share that moved a crew to a job site is a cost of doing the work.
VerdictStands
Spending the owner chose and a buyer can stop on day one, which is what discretionary means.
What the Schedule Leaves Out
Only when you will not do it yourself. This is the same money as the owner-comp add-back above, going the other way, which is why claiming that add-back and hiring a manager double-counts one salary.
Not counted while you are doing the job yourself. Change the answer above and it comes back.
A landlord who is also the seller can charge himself anything. Under-market rent is a discount that ends with the lease, and lenders price the lease you will actually sign.
Depreciation is the accounting saying the equipment is being used up. If it is, replacing it is a real annual cost that the add-back above quietly removed.
A spouse on the books, a son on weekends, a parent answering the phone. The hours do not leave with the family; the free part does.
Marketed SDE
$500,000
What the listing says
Defensible Today
$460,000
Only what stands, less what arrives
If Every Pending Line Is Documented
$500,000
The ceiling the backup could reach
The two stories are $40,000 apart, which is $140,000 of price at 3.5x. That distance is the negotiation, and every dollar of it gets multiplied.
$40,000 of it is waiting on documents rather than refused. Ask for the backup before you argue the price.
Marketed above the $500k SDE floor this site is written for, and defensible below it. The structure every financing tool here assumes is built on the second number.
Where This Goes Next
- Price the defensible number against a cited band, since that is the one a lender underwrites.
- Run it through debt service to see what the rebuilt earnings actually finance.
- Scope a quality of earnings brief around the lines still waiting on documents, which is what a QoE firm is being paid to settle.
- Ask for the backup in one batch, because a drip of one-off requests reads as a tire-kicker.