Read the statement. Change the deal.

Use listing numbers, not optimism. Add the people and tools you will really need, move the financing, and see what cash remains after debt.

1What it earnsthe business’s real profit2What you paythe price, plus costs you add3How you repaywhat is left after debt

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Switching starts a fresh scenario and discards unsaved edits. Custom mode unlocks industry examples and the full operating statement. Restore returns to the original article figures.

1. Normalize the business

New here? Pick an example business to see how it works, or just type in your own numbers.

Pick an example to fill the boxes, or enter your own. Either way, swap in the seller's real figures when you have them.

Holding a seller’s profit & loss statement (P&L)? Copy it across in five steps

A P&L (also called an income statement) is a one-page list of what the business earned and spent in a year. You do not need to be an accountant: match each line on their sheet to a box below.

Revenue: the top line of the P&L, often “Sales”, “Revenue” or “Total income”.
Costs: sort every expense line into the seven boxes below. If a line does not fit, put it in “Vehicles, repairs and other”.
Skip three things: loan interest, income tax and depreciation. They are not day-to-day running costs, so SDE leaves them out.
Owner’s pay: find the owner’s salary, draws or “officer compensation” and enter it under Owner adjustments. A new owner who runs the business keeps this money, so it gets added back.
One-offs: add back personal or one-time costs only if the seller can prove them (invoices, bank records).

SDE (Seller’s Discretionary Earnings) = revenue − running costs + the owner’s pay + proven one-offs. It is the profit one working owner would take home. More clear terms →

Which line on my P&L goes where?

If your statement says	Put it in
Sales, Revenue, Total income	Annual revenue
Cost of sales, COGS, Materials, Subcontractors, Brokerage & duties	Materials / cost of sales
Wages, Salaries, CPP / payroll tax, Contract labour	Payroll and contractors
Rent, Common area expenses, Telephone & utilities	Rent and utilities
Advertising & promotion, Marketing, Commissions	Marketing and sales
Insurance, Licences & permits, Professional fees	Insurance and licenses
Computer & internet, Subscriptions, Office	Software and office
Automotive, Repairs & maintenance, Travel, Meals, Bank charges	Vehicles, repairs and other
Owner wages, Officer compensation, Draws	Current owner salary (and leave it out of payroll)
Interest, Income taxes, Depreciation, Amortization, Shareholder loans, Donations	Skip. SDE leaves these out. Donations can be an add-back if proven.

Not sure where to start? Pick a preset and poke around.

Industry exampleIllustrative structure, not a market average.

Choose a sector to prefill a plausible team and operating structure.

OPERATING STATEMENTANNUAL AMOUNT

REVENUE

Annual revenueThe top line of the P&L: “Sales”, “Revenue” or “Total income”, before any costs.

OPERATING COSTS

Reported operating costsAdds up by itself from the seven boxes below. Nothing to type here.

Materials / cost of salesOn the P&L: “Cost of goods sold” or “Cost of sales”. Materials, inventory, subcontractors. Payroll and contractors“Wages”, “Salaries”, “Contract labour”. Leave out the owner’s own pay; it goes below. Rent and utilities“Rent”, “Lease”, “Utilities”, “Phone and internet”. Marketing and sales“Advertising”, “Promotion”, sales commissions. Insurance and licenses“Insurance”, “Licences and permits”, “Professional fees”. Software and office“Software”, “Subscriptions”, “Office supplies”. Vehicles, repairs and otherEverything else: vehicles, fuel, repairs, bank fees. Not interest, tax or depreciation.

OWNER ADJUSTMENTS

Current owner salary + benefitsFind “Owner salary”, “Draws” or “Officer compensation”. You add it back because a new owner stops paying the old owner. You will pay yourself or a manager later, in step 2. Enter it only if it was already counted in the costs above.

Verified one-time add-backsPersonal or one-time costs on the P&L (the owner’s car, a legal settlement). Only what the seller can prove.

Revenue$0

Reported operating costs($0)

Reported operating income$0

Add back: owner salary + benefits$0

Add back: verified one-time items$0

Normalized SDE$0

2. Price the business (seller's view)

A broker's math starts from the seller's normalized SDE times a multiple. Your own costs come next, and they change what you can afford - not what the seller thinks it is worth.

SDE multiplePrice = SDE × this number. Usually set by the market and the broker's ask: divide their asking price by SDE to see theirs, then test your own. 2.5 means paying 2.5 years of profit.

Custom multiple: your pricing assumption, not an industry average. Implied price = normalized earnings × multiple. Financing uses the purchase-price field when entered.

PRICE AT YOUR MULTIPLE -

AFTER-COST PRICE REFERENCE -

Buyer ceiling = (seller SDE minus your planned costs below) × the multiple. What the same multiple supports once the people and tools you will need are funded. A negotiating reference, not a valuation.

Purchase price used for financingDefaults to the implied valuation. Enter a different number to test an offer.

YOUR OPERATING PLAN (BUYER’S VIEW)

Costs you will take on after closing that the seller does not have, like a manager to replace the owner. Each one lowers what is left for you.

What it isPer year

3. PAY IT BACK

Now the financing: how much you put in, how much the seller waits for, and what the bank lends. The result at the bottom shows what is left each year.

Your cash, % of priceOnly have 20% to put in? Type 20. Lenders usually want 15 to 25%.

Seller waits for, % of priceThe seller lets you pay this part over time. Negotiated, not required. Type 0 for none.

Bank loan interest, % a yearA planning guess, not a quote. Ask a lender for the real rate.

Canadian acquisition loans-from BDC, banks or other eligible lenders-are commonly priced from a lender's base rate plus a risk spread. Use this as a planning range, not a quote.

Bank loan term, yearsHow long you take to pay it off. Seven to ten is common.

Yearly payment to the sellerDollars you pay the seller each year until the seller note is cleared.

SELLER NORMALIZED SDE -

PURCHASE PRICE USED FOR FINANCING -

YOUR CASH AT CLOSING -

OWED TO THE SELLER -

BORROWED FROM THE BANK -

What remains each year?

Seller normalized SDE -

Annual senior-loan payment (principal + interest) -

Annual seller-note payment -

Pre-tax cash remaining -

Senior-debt coverage (buyer-adjusted SDE ÷ senior payment) -

Total fixed-debt coverage (incl. seller note) -

How to read the coverage numbers

Pre-tax cash remaining: What is left in a year after your planned costs and every loan payment, before income tax. If it is negative, the business does not pay for its own purchase.
Senior-debt coverage: Earnings after your planned costs ÷ the yearly bank-loan payment. 1.0× means exactly enough, nothing spare. Lenders usually want at least about 1.25×.
Total fixed-debt coverage: The same test, but it also counts the yearly payment to the seller. It is the honest number, because the seller still has to be paid.
Remove a cost and watch it move: Take out the replacement manager with the × above and the cash remaining and both coverage ratios rise at once. Ask yourself whether you are really willing to run the role yourself.

Funding stack: buyer cash + seller-note principal + senior-loan principal = purchase price used for financing. Interest is not included in the principal figures; it is included in the annual senior-loan payment. Cash needed upfront excludes legal fees, lender fees, working capital, inventory adjustments and reserves.

Before you trust the answer

The books and the supplied statements point to the same discipline: normalize first, then verify.

Reconcile revenue to tax returns, bank deposits and invoices.
Replace the seller’s labour with a realistic owner or operator salary.
Separate genuine one-time add-backs from recurring costs.
Budget maintenance capital expenditure, inventory and working capital.
Stress-test customer concentration, owner dependence and key-person risk.
Confirm debt coverage still works after tax, reinvestment and personal runway.

Pressure-test it before an LOI

Bring this exact structure to a conversation. We'll challenge the owner-role, financing and downside assumptions before you treat the result as available cash.

Talk to AndChill →

Planning tool only - not a valuation, lender commitment or investment recommendation. Missing items may include tax, transaction costs, working capital, capital expenditure, inventory and personal runway.