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SDE, EBITDA and Operating Cash Bridge

Separate normalized earnings from owner replacement, maintenance capital spending and working-capital cash needs.

Your inputs stay in this page. Calculations run in your browser. Financial figures are not sent to the website, saved in your browser, or placed in a URL. Downloading a scenario creates a local file.

Annual earnings and cash needs

Reconciled starting SDE ($)For the same stated annual period; confirm what the seller already included.Required owner replacement cost ($)Annual salary, payroll taxes, benefits and other necessary compensation.Additional recurring operating cost ($)Maintenance capital spending ($)Shown after EBITDA, not deducted within it.Working-capital cash investment ($)Positive uses cash; a documented release can be negative.Cash taxes for this analysis ($)

Incremental adjustments

Enter only amounts not already included in the starting SDE. Pending and rejected amounts are excluded. A partly supported item uses the supported share.

One-time legal expenseReview statusSupported share (%)Evidence reference (optional)

Personal expense not needed by buyerReview statusSupported share (%)Evidence reference (optional)

Other incremental adjustmentReview statusSupported share (%)Evidence reference (optional)

Build the owner replacement amount These calculations run locally. Values are not uploaded, put in a URL or stored in the browser. Exporting makes a local JSON file.

Allocate roles before using the replacement line

Use up to three function groups. Existing-team coverage still needs demonstrated capacity. Identify incremental cost above amounts already reflected in the starting earnings; do not subtract the same cost twice. The allocation choice describes the plan and does not determine worker classification.

Function group 1Function-group referenceCoverage plan

Weekly paid hoursPaid weeks per yearBase cost per paid hour ($)Additional payroll/benefit burden (%)Other annual compensation or fee ($)Cost already in starting earnings ($)

Function group 2Function-group referenceCoverage plan

Weekly paid hoursPaid weeks per yearBase cost per paid hour ($)Additional payroll/benefit burden (%)Other annual compensation or fee ($)Cost already in starting earnings ($)

Function group 3Function-group referenceCoverage plan

Weekly paid hoursPaid weeks per yearBase cost per paid hour ($)Additional payroll/benefit burden (%)Other annual compensation or fee ($)Cost already in starting earnings ($)

Role-cost method and example

Future role cost = weekly paid hours × paid weeks × hourly base cost × (1 + additional burden % / 100) + other annual compensation/fee
Incremental replacement = future role cost − cost already in starting earnings

The example produces $80,000 management cost, $25,000 estimating cost less $10,000 already included, and a $30,000 administration retainer: $125,000 incremental annual replacement. Rates, percentages and paid weeks are hypothetical assumptions, not wage quotes or statutory tax rates. If the hourly rate already includes a benefit, do not add it in burden or the annual fee. A salary can be entered as an annual amount with zero hourly components.

Blank active fields are unresolved; an unused group stays entirely blank. Baseline cost above future cost needs a separately reviewed cost-reduction analysis rather than a negative replacement line. Click the explicit transfer button to copy the result into the earnings bridge. Review the rest of the bridge before using it.

Read the owner-role evidence and sensitivity. BLS occupational wage definitions provide context; a wage estimate is not a full compensation quote. BLS employer-compensation components explain why wages and benefits should be distinguished. No BLS rate is prefilled here.

What the results mean

The starting SDE must already be reconciled. This tool accepts that starting metric; it does not validate the company's books. Add only incremental supported items, then deduct required owner replacement and additional operating costs. A pending item is excluded and shown as unresolved.

EBITDA = SDE + supported incremental adjustments − replacement cost − operating corrections
Cash before financing = EBITDA − maintenance capex − working-capital investment − cash taxes

Worked example

Illustrative annual SDE of $420,000 plus $35,000 and $18,000 of supported adjustments, less $125,000 of replacement compensation, gives $348,000 of normalized EBITDA. After $35,000 maintenance capex, cash before financing and other needs is $313,000. A separate $40,000 rejected adjustment contributes zero.

Limits and review

EBITDA is not free cash flow or a valuation. The cash subtotal omits financing until separately analyzed. Required costs can differ across buyer operating plans. Negative earnings remain negative; blank required fields do not become zeros. Review the accounting basis, adjustment evidence and potential double counting with the appropriate adviser. All examples use USD and annual amounts.

Continue with the evidence

Read the companion guide

Download the editable workbook

Primary references

Definitions: SEC EBITDA terminology. See the companion guide for the scope of that reference.

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