--- title: "Which add-backs should you accept when buying a website or small SaaS?" url: https://firstpassmemo.com/answers/add-backs-when-buying-a-website/ updated: 2026-10-27 publisher: FirstPass Memo (hello@firstpassmemo.com) --- Answers # Which add-backs should you accept when buying a website or small SaaS? Short answer: Accept an add-back only if the cost truly stops when you own the business and the seller can show it in the books. Owner pay goes back in at what you would pay someone to do the work. Reject recurring tools, ads, contractors and 'one-off' costs that show up every year, then apply the multiple to the profit you believe. Updated 27 October 2026 · Figures checked against their sources on 27 October 2026 · By Joan Murphy (https://firstpassmemo.com/about/joan-murphy/) (pen name) · How we check (https://firstpassmemo.com/methodology/) · Corrections (https://firstpassmemo.com/editorial-policy/) ## Check a listing now, free FirstPass Memo offers a free red-flag checker for business-for-sale listings and a $79 first-pass memo on a specific listing you send, paid after delivery. Paste any listing below for payback, the asking multiple and its red flags. Nothing you paste leaves your browser. Open the full checker (https://firstpassmemo.com/checker/) to unlock every flag with its seller question. Only know the price and monthly profit? Put them in the link and the check runs on its own: firstpassmemo.com/checker/?ask=45000&profit=1500 (https://firstpassmemo.com/checker/?ask=45000&profit=1500&via=box). ## What are add-backs? Add-backs are costs a seller adds back to profit because, they say, a new owner will not have them. The adjusted figure is often called seller's discretionary earnings (SDE); see SDE vs net profit (https://firstpassmemo.com/answers/sde-vs-net-profit-for-valuing-an-online-business/). Because the asking price is a multiple of that figure, every $100 a month of add-backs can add several thousand dollars to the price. That makes them one of the first things to check. ## Which add-backs are usually fair? - Owner pay, but only once you put back the cost of doing the owner's job. If the seller works 10 hours a week, price that time at what you would pay a contractor, even if you plan to do it yourself. - Genuine one-off costs: a site redesign, a legal bill for a settled dispute, a one-time migration. Ask for the invoice and check it does not repeat in earlier years. - Personal expenses run through the business: a phone, a car, travel unrelated to the business. These are fair only if the seller can show them line by line. - Costs of the seller's other projects paid from the same account, if you can see which tools and services belong to which business. ## Which should you reject? - Software, hosting, content writers, virtual assistants and ad spend that the business needs to keep its revenue. - "One-off" costs that show up every year under a different name. - Owner pay added back in full when the listing gives no owner hours; see the owner hours not stated (https://firstpassmemo.com/flags/owner-hours-not-stated/) flag. - Cuts to marketing or content the seller made in the last few months to raise profit before listing. Profit may hold for a while and then fall. - Any add-back the seller cannot tie to a bank or card statement. A margin that looks too good is often a sign of generous add-backs. Our checker raises the margin above 90% (https://firstpassmemo.com/flags/very-high-margin/) flag for this reason. ## How do you check them? Ask for a profit and loss statement by month for at least 12 months, with each add-back as a separate line, and the statements that back up the largest ones. Compare costs month by month: a cost that stops just before the listing deserves a question. Then work out profit your way, with only the add-backs you accept and a fair cost for the owner's time, and apply the multiple to that figure. See how many times profit online businesses sell for (https://firstpassmemo.com/answers/how-many-times-profit-do-online-businesses-sell-for/) and hidden costs of buying a website (https://firstpassmemo.com/answers/hidden-costs-of-buying-a-website/). ## What does a composite repricing look like? This is a composite example, not a real deal. A content site is listed at $54,000, which is 36 times a stated SDE of $1,500 a month. That figure includes $400 a month of owner pay for about 8 hours a week, $150 a month for a writer the seller says they will stop using, and a $1,200 redesign spread over the year, $100 a month. The buyer accepts the redesign, prices the owner's 8 hours at $300 a month of contractor time, and keeps the writer, because traffic depends on new posts. Adjusted profit is $1,500 − $300 − $150 = $1,050 a month. At the same 36 times, that supports about $37,800, and the buyer opens at $38,000 with the working shown. Run the listing through the free red-flag checker (https://firstpassmemo.com/checker/) first; it flags margins and missing owner hours before you ask for the books. ## Frequently asked questions ### Should I add back the owner's salary if I will run the business myself? Only after you subtract a fair cost for your own time. Your hours are worth something, and if you later hire help, the business has to pay for it. ### Are add-backs the same as fraud? No. Add-backs are a normal part of small business sales. The problem is add-backs that are vague, recurring or not supported by statements, which overstate the profit you will actually keep. ### How do I raise add-backs with a seller without souring the deal? Show your working: list each add-back, say which you accept and why, and give the profit and price that follow. A seller can argue with a line item more easily than with a lower number on its own. ## Sources - FirstPass Memo, red-flag checker rules (https://firstpassmemo.com/flags/), our own rules, published as /rules.json - FirstPass Memo, seller question bank, October 2026 (general checklist) (https://firstpassmemo.com/get/seller-questions-general), our own questions - FirstPass Memo, free buyer calculators (https://firstpassmemo.com/tools/), our own calculators; the formulas are on each page ## Related - Free red-flag checker (https://firstpassmemo.com/checker/) - SDE vs net profit (https://firstpassmemo.com/answers/sde-vs-net-profit-for-valuing-an-online-business/) - How many times profit do online businesses sell for? (https://firstpassmemo.com/answers/how-many-times-profit-do-online-businesses-sell-for/) - Hidden costs of buying a website (https://firstpassmemo.com/answers/hidden-costs-of-buying-a-website/) - How to negotiate the price of a website (https://firstpassmemo.com/answers/how-to-negotiate-the-price-of-a-website/) - How to value a website (https://firstpassmemo.com/answers/how-to-value-a-website/) - Red flag: a margin above 90% (https://firstpassmemo.com/flags/very-high-margin/) - Red flag: owner hours not stated (https://firstpassmemo.com/flags/owner-hours-not-stated/) - Glossary of listing terms (https://firstpassmemo.com/glossary/) - More questions buyers ask (https://firstpassmemo.com/answers/) Composite examples are invented and labelled. Figures from other sites are quoted with a link and the date we read them; FirstPass figures are asking prices and seller-stated profit, not sale prices. Informational screening only, not investment, legal or tax advice. ## Looking at a specific listing? Get a full memo — $79, pay after delivery. Paste the link; your memo arrives within 24 hours (Mon–Fri). $79, pay after delivery: we send the memo first, then a payment link. Human quick reviews cost $199–$390. --- FirstPass Memo is informational screening, not investment, legal, tax, accounting or valuation advice, and not an audit. Seller figures are not independently verified. HTML version: https://firstpassmemo.com/answers/add-backs-when-buying-a-website/