How to Increase SDE Before You Sell: A 12-Month Plan

To increase SDE before you sell, stop trying to grow the business and start growing the earnings a buyer will actually credit. Document every add-back, fix the margin leaks, remove yourself from the weekly loop, spread revenue across channels, and clean up 24 months of books. On a business earning $400K in SDE at a 3x multiple, $60K of defensible add-backs is worth $180K at close.

That is the whole plan. The rest of this post is the order I would do it in, and what a buyer does to each number.

I have reviewed 50+ deals as a buyer, and I sold my own agency this year. The pattern is the same every time. The seller shows an SDE number. The buyer rebuilds it from the bank statements. The gap between those two numbers, multiplied by the multiple, is the price you lose. If you want the definition first, read SDE vs EBITDA for e-commerce. This post assumes you know what SDE is and want to raise it. For where multiples sit right now, see how to value an e-commerce business.

The One Rule: Credited Earnings, Not Reported Earnings

Reported SDE is what your spreadsheet says. Credited SDE is what survives diligence. A buyer takes your number and tests it against bank statements, platform reports and tax filings. Anything they cannot tie to a source gets cut. Anything that looks recurring gets cut. Anything that depends on you personally gets discounted through the multiple instead.

So the job in the last 12 months is not heroics. It is making every dollar of SDE easy to prove, hard to dispute and safe to repeat.

Here is the illustration I use. This is a hypothetical business with round numbers, not a real deal or a real client.

Say the books show $340K before the contested items. You have $60K of add-backs: owner perks, a one-time legal bill, a software migration. If you documented them and the buyer credits all of them, SDE is $400K. At 3x the price is $1.2M. If you cannot prove them and the buyer strips them, SDE is $340K and the price is $1.02M. Same business. Same year. $180K apart.

Nothing about the products, the listings or the customers changed. Only the paper did.

Move 1: Add-Backs a Buyer Accepts vs the Ones They Strip

Add-backs are the cheapest lever you have, and the one most abused. A seller who pads the list loses trust on every line, including the honest ones. A seller who files each item cleanly gets the benefit of the doubt.

Add-back	Buyer usually	Why
Owner salary and benefits	Accepts	It goes away when you do. Expect the buyer to test whether a manager is needed
Personal expenses run through the business	Accepts with receipts	Clear, documented, not part of operations
One-time legal, migration or rebrand cost	Accepts with proof	Needs an invoice and a reason it will not recur
Recurring software or contractor you call one-time	Strips	It shows up again next year
Owner hours you stopped paying yourself for	Strips	Someone has to do that work, so the buyer prices it back in
Inventory write-downs you call non-cash	Strips	Bad purchasing is an operating cost, not an add-back

Three rules I would follow.

One line, one document. Every add-back gets an invoice or statement, a date, and a one-sentence reason it will not recur. If you cannot write that sentence, the item is not an add-back.

Be conservative with the grey ones. A $4K item you drop costs you $12K at 3x. A $4K item that gets caught costs you the buyer's belief in the other $56K.

Check the treatment with professionals. What counts as a legitimate add-back and how it flows through taxes and the purchase agreement is a question for your CPA and deal counsel. I am describing what buyers challenge, not giving tax or legal advice.

If your add-back list is mostly owner pay, you are in decent shape. If it is mostly "one-time" costs that happened three years running, rebuild it before a buyer does.

Move 2: Fix the Margin Leaks That Show Up in SDE

A recovered dollar of margin is worth more than an add-back, because it is real and it repeats. Buyers pay for earnings they believe will continue.

The leaks I see most often:

• Fee creep. The total FBA take rate has moved from roughly 28% in 2022 to roughly 34% in 2026, and Amazon's own 2026 referral and fulfillment fee update is where the changes are documented. Re-price, re-size packaging and cut slow movers before the trailing twelve months get locked in.
• Ad waste. Branded and non-branded spend blended into one ACOS, with no one checking search terms. A pass through the search term report is usually the highest return hour of the year. If you want an outside read, an Amazon audit will surface it.
• Returns and long-term storage. Return rates by SKU and aged inventory fees are quiet line items that vanish into "other." Break them out, then fix or liquidate.
• Unprofitable SKUs. A long tail of products that cover revenue but not cost. Cut them, and revenue falls while SDE rises. A buyer prices earnings, not top line.

Here is the same math as before. On $3M of revenue, two points of margin is $60K a year. At 3x that is $180K in price. Two points is not heroic. It is a clean-up.

One catch: the improvement has to be in the trailing financials. A fix you make in month 11 and mention in the pitch deck is a story. A fix that runs through the P&L for six or more months is a number. That is why this move goes early.

If margin work is where you need hands, that is what Amazon management does for brands before and after a sale.

Move 3: Take Yourself Out of the Weekly Loop

This is the one that hides inside SDE. If you personally run ads, order inventory, answer the supplier and approve every listing, your SDE is partly your salary in disguise. The buyer knows it. They either hire the replacement and subtract the cost, or they pay a lower multiple for the risk.

The number I watch is owner hours per week. At 50 or more, the buyer prices in replacing you. At 10 to 15, the business has systems, and that gap can move the multiple by 0.5 to 1x on its own.

What to do, in order:

1. Write the SOPs. PPC, inventory ordering, customer service, listing updates. If it lives in your head, a buyer cannot see the business running without you.
2. Hand off one function at a time. Not everything at once. Pick the one that takes the most of your week.
3. Run a month where you do not touch it. If numbers hold, you have evidence. If they dip, you found the gap while it is still cheap to fix.

Do not hide this from the buyer. They will find it on the first call. A business that runs without you for 90 days, with the metrics to show it, is a different asset.

Move 4: Channel Concentration Is a Discount

One marketplace, one account, one hero SKU. Any of those is a discount, and a buyer will name it out loud.

From the deals I see, single-channel Amazon FBA businesses trade at 2 to 3x SDE and multi-channel businesses with three or more channels run 3 to 4.5x, as covered in the valuation guide. That is a wide gap, and it is driven by risk, not by revenue.

The constraint is time. A buyer needs about six months of history on a new channel before they credit it. A launch in month 10 does not count. A launch in month 5 does.

If TikTok Shop is your second channel, that is a build I do for brands, and the take rate runs lower than FBA. Whichever you pick, start it early enough to have history.

Move 5: Clean Books and 24 Months of Reconciled Financials

Nothing else on this list matters if the books do not tie out. A buyer's diligence is mostly one question: does the revenue in the platform reports match the deposits in the bank and the numbers on the P&L?

What I would want in the data room:

• 24 months of monthly P&Ls on accrual accounting, not cash
• Platform reports (Seller Central, TikTok Shop, Shopify) reconciled to bank deposits
• Personal and business expenses separated, going forward and as far back as practical
• The add-back file from Move 1, each line tied to a document
• Inventory counts and COGS that match purchase orders

This is dull work and it is the most reliable return on your time. Bad books do not just cost you credibility. They invite a re-trade after the letter of intent, where the price drops during diligence. For what buyers actually test, run through the e-commerce acquisition due diligence checklist before they do.

What About "Just Hire a Broker"?

The common default is to hire a broker, hand over the books as they are, and trust the number to take care of itself. A broker can market a business. A broker cannot create earnings quality that you did not build. Buyers underwrite the books, not the pitch, and a thin file shows up in the offer or in the re-trade.

That does not mean skip help. It means the prep above is yours either way. If you want to see how the process looks after that, I wrote up how to sell without a broker. If you do hire help, here is how to choose between a business broker and an M&A advisor.

If You Run an Agency, Not a Brand

Everything above applies, with two changes. The earnings-quality test for an agency is founder dependence and client concentration.

Founder dependence: do clients stay because of your team or because of you? If you are the one on every call, the buyer is buying a job. Client concentration: if one or two clients carry a big share of revenue, expect a discount or an earn-out tied to them.

Agency add-backs also look different. Owner pay and one-time costs work the same way, but the buyer will look hard at contractor hours that are really your own unpaid hours. The same document rule applies.

I went through this from the seller's chair this year. I wrote about selling my agency and staying on as CEO and about what buyers check when an agency buys yours.

The Decision Rule: Start These Two This Quarter

You cannot do all five at once, and you do not need to. If you plan to sell in 12 months, start these two now:

1. The add-back file and the books. It costs the least, takes the longest to build history for, and every other move depends on it. Reconcile 24 months, and put a document behind every add-back.
2. The one margin or channel move with the longest lead time. If your margin is leaking, fix it now so it is in the trailing numbers. If you are single-channel, launch the second one now so it has six months of history. Pick whichever costs you more at the multiple.

Owner dependence and the SOPs can run alongside, but those two cannot be rushed later. A buyer cannot credit history you do not have.

If you are weighing a sale and want an operator's read on what a buyer would credit today, talk to me about selling your business. I also publish what I am buying and how I underwrite it on my deals page.

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