Discretionary earnings add-backs
Expenses added back to earnings because they are one-time, personal to the owner, or would not continue under new ownership.
In more detail
Add-backs are the bridge from what the tax return says to what the business actually earns. The recurring categories are: Owner compensation above or below market. Personal expenses run through the business: vehicles, travel, phones, memberships. One-time costs that will not recur: a lawsuit, a rebrand, a failed hire, storm damage. Non-cash charges. Rent paid to a related party at other than market rate. Family members on payroll who do not work in the business. Discontinued product lines or locations. The discipline is documentation. An add-back you can prove survives diligence. One you cannot is simply removed from the price, and a pattern of unsupportable add-backs costs you credibility on the ones that were real.
For example
A $12,000 family cell-phone plan, a $9,000 one-time website rebuild, and $18,000 of personal travel are all add-backs. A "slow year" is not, and neither is a cost you intend to cut but have not.
If you are selling
Every documented add-back raises the earnings your price is built on. Keep receipts and keep the categories clean as you go, not at the last minute.
If you are buying
Add-backs are where valuations get inflated. Test each one for whether the cost genuinely disappears the day you take over.
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