The Owner Income Bridge: From Seller Earnings to Buyer Cash

Start with supported earnings

Reconcile the reported financials and proposed adjustments. Keep accepted and rejected add-backs separate. A cost that will continue under the buyer should not disappear simply because it was associated with the seller.

Replace the seller roles

List what the owner actually does and decide who performs those tasks after closing. Include compensation, recruiting, training, and transition costs where needed. One replacement salary may not cover a seller performing sales, operations, and management.

Model financing and capital needs

Subtract actual debt service and required reinvestment. Plan working capital around collection timing, inventory, payroll, and seasonal demand. Accounting profit cannot pay an obligation if the cash has not been collected.

Test the downside

Reduce revenue, delay collections, or increase key costs using plausible operating scenarios. Compare remaining cash with owner income needs and reserves. If the bridge fails, adjust price, structure, or the decision to buy.

Action checklist

• Support earnings adjustments
• Price replacement roles
• Use actual financing terms
• Budget working capital
• Test buyer income in a downside case

Can I expect to take home the seller SDE?

Only after analyzing replacement labor, financing, taxes, reinvestment, and working capital. SDE is a valuation input, not a guaranteed owner paycheck.