What an add-back worksheet should show
A seller's adjusted earnings need a bridge back to the financial statements. For every proposed adjustment, record the expense, why its treatment might change after the purchase, the supporting record and any cost that replaces it. Our add-backs definition explains the concept.
The workbook totals the proposed bridge and keeps a separate place for lender review notes. It never marks an adjustment approved. A supporting-document reference helps organize the discussion; it does not verify the document or make an expense acceptable.
Owner compensation may have a replacement cost
Hypothetical annual earnings bridge · USD
| Item | Proposed add-back | Ongoing deduction | Net change |
|---|---|---|---|
| Owner compensation replaced by a manager | $80,000 | $60,000 | $20,000 |
| Proposed one-time repair adjustment | $12,000 | $0 | $12,000 |
With reported net income of $180,000, these assumptions produce $212,000 after the proposed adjustments. The payroll and replacement-role budget matter as much as the seller's compensation figure. The repair still needs evidence and an explanation of why it will not recur.
The third tab adds an unsupported $6,000 travel claim. With its evidence field blank, the workbook shows Incomplete instead of treating the claim as supported.
Fill in the bridge in one annual period
- Enter reported annual net income and its statement source. Do not start from already adjusted SDE or EBITDA and add the same expenses again.
- Add only the rows you need. Name the adjustment, enter positive amounts for the proposed add-back and ongoing deduction, and record the supporting document. Use zero for a known unused side; leave unknown amounts blank.
- Keep deductions visible. Include replacement management, recurring expenses or other ongoing costs only to the extent they are not already reflected in your starting figure.
- Record lender review separately. Use the confirmation-reference column for what the lender actually said. Those notes do not change the formulas. Revise a proposed amount if it is rejected or changes.
- Review the full cash flow next. Interest, taxes, capital needs, business debt and household obligations require a broader analysis. See how lenders calculate cash flow.
Keep these distinctions clear
- Proposed is different from confirmed
- The total is an arithmetic proposal. A lender may use a different amount or treatment after reviewing the records.
- One-time is a claim to support
- Check prior periods, invoices and the reason for the expense. Repeated repairs or recurring professional fees need a clear explanation before being treated as nonrecurring.
- A replacement cost is not a second deduction
- If the ongoing cost already appears in the baseline, subtracting it again understates earnings. Explain the starting figure and each change.
- Missing information is not zero
- Used rows with missing amounts, a missing label or no support reference keep the result incomplete. Completely unused rows can stay blank.
What the download includes
Three editable tabs: Your worksheet, Worked example and Missing evidence. It contains no macros or automatic connection to your financing file. You can use it yourself or share the original with clients with attribution to Precise SBA.
This is an original preparation aid, not an SBA form or a complete financial spread. For program requirements, consult the current SBA origination SOP and your lender. For the overall package, use our lender-ready request guide and sources-and-uses template.