What can I add back on a plumbing company's books?

Plumbing business add-backs are the costs on your books that a new owner would not have to pay. Adding them back shows what the company really earns, and since buyers price a plumbing company as a multiple of earnings, every dollar you can prove counts several times over. Every dollar you cannot prove gets cut.

Start with the free add-back finder. It walks you through the items below, one question at a time, and totals what you could add back. No email needed. Then use this page to gather the proof.

This is general information, not tax or accounting advice. Your CPA should build the final add-back schedule with you.

How add-backs turn into earnings

Small owner-run shops are priced on seller's discretionary earnings (SDE): what one full-time owner takes home before paying themselves and before debt. That is how BizBuySell reports the plumbing sales behind its median of 2.24x SDE for 2021 to 2025. In plain math:

Start with	Add	Then
Net profit before tax	Your pay, interest and depreciation	Add proven personal and one-time costs
Rent you pay yourself	Adjust it to market, up or down	Subtract income that will not repeat

Larger companies, roughly $1M or more of EBITDA where PE add-on buyers start to engage, are priced on adjusted EBITDA instead. That is SDE minus a market salary for a manager to do your job. More on that below.

The plumbing add-backs checklist

Sizes are our estimates of what we typically see in plumbing companies with $1M to $15M of revenue, not published figures.

Add-back	Plumbing example	Proof a buyer wants	Typical size (our estimate)
Your pay above market	Salary, draws, distributions, bonuses	W-2s, K-1s, payroll reports	$100K to $300K or more
Family on payroll	Spouse or kids paid but not working, or paid above the role	Payroll records, timesheets, what the job would cost to hire	$30K to $120K
Personal vehicles	Family trucks, a boat or trailer on the books	Titles, insurance, mileage logs	$10K to $40K
Your insurance and benefits	Health, life, disability, phone	Invoices and plan statements	$10K to $30K
Your retirement contributions	401(k), SEP or pension above the staff plan	Plan statements	$10K to $70K
Rent you pay yourself	Shop and yard you own, rent above or below market	Lease plus a market rent opinion	Plus or minus $10K to $60K
One-time legal or move	A lawsuit, settlement or shop move	Invoices, the settlement, a note on why it won't recur	Varies
One-time equipment repair	A blown jetter or excavator rebuild	Invoice plus 3 years of repair history	$5K to $40K
Freeze surge costs	Overtime and rentals in an unusual freeze	Payroll and rental invoices for that event	Varies
Personal travel, meals, dues	Trips, club dues, personal meals	Receipts and a calendar	$5K to $25K
Interest and depreciation	Truck and equipment loans and write-offs	Tax return depreciation schedule, loan statements	Varies
One-off marketing	A rebrand, new website or truck wraps for a new name	Invoices and dates	$10K to $50K
Software switch	One-time cost of moving to a field service platform	Contract and invoices	$5K to $30K

Two notes on the table. Interest and depreciation are added back, but buyers then budget for normal truck and equipment replacement, so an old fleet still costs you. And if you add back freeze surge costs, expect the buyer to take out the surge revenue too. Nobody pays a multiple on a once-in-a-decade freeze.

Which add-backs buyers reject

Quality of earnings reviews test every add-back, and buyers also deduct items that make earnings look better than they are, such as an owner who draws no salary for work a paid manager would have to do. These are the ones that get cut most:

Round numbers with no paper. "About $20K of personal stuff" is the add-back buyers cut first.
"One-time" costs that happen every year. If the jetter needs a rebuild every winter, it is a cost of doing business.
Family pay where the family works. If your spouse runs dispatch 40 hours a week, a buyer has to pay someone to do it. Only pay above the market rate for that job is an add-back.
Cash that never hit the books. SBA lenders now check seller numbers against IRS transcripts, so income that is not on your return is very hard to count.
Costs the buyer will still have. Your service manager's bonus, the answering service, the second truck you call personal but use for calls.
Too many add-backs. A schedule that adds back a big share of revenue looks like double counting.

Expect negative adjustments too: pay below market for a second working owner, family working unpaid, truck replacement you have put off, and plumbers on 1099s who should be W-2. Each one lowers earnings.

How our calculator treats add-backs

Our free estimate counts your pay, interest and depreciation in full. For other add-backs we assume a buyer accepts 75% to 100% of itemized ones and 50% to 100% of a rough total you did not itemize, and we cap the two together at 15% of revenue. These are our estimates of how buyers behave, not published figures, and they are why itemizing raises your low case.

Illustrative estimate

Replacing you as master plumber and manager

This is the add-back owners misread most. On an SDE basis, all of one working owner's pay is added back, because an owner-operator buyer will do your job. If two owners work in the business, only one owner's pay is added back; the second stays as a cost at market pay.

On an adjusted EBITDA basis, a buyer assumes they will hire a manager to run the company, so they subtract that salary from SDE. For EBITDA-basis plumbing companies, the owner's pay is replaced with a market salary for a general manager or service manager instead of being added back in full. For reference, the national median wage for general and operations managers was $101,280 in May 2023, with a mean of $129,330. Our calculator uses its own estimates on top of that:

Your revenue	Manager salary we assume (our estimate)
Under $3M	About $100,000
$3M to $7.5M	About $120,000
$7.5M and over	About $150,000

We then add about 20% for payroll taxes and benefits and adjust for wages in your state, also our estimates.

Two plumbing wrinkles:

If you are also the master plumber of record, a buyer needs a licensed master after you leave. If you hold the only license, that is a license and qualifier problem as much as a salary one, and it can stop a deal outright. We could not find a published figure for what buyers pay a master to qualify a company, so we do not add one.
If you still run calls, a buyer has to replace a plumber as well as a manager. Our calculator handles that through its owner dependence question rather than a second salary deduction, so it is not counted twice.

Worked example: Same shop, rough versus documented add-backs (made-up numbers)

A made-up plumbing shop has $2.4M of revenue, $180K of net profit, $150K of owner pay and $45K of interest and depreciation.

Itemized add-backs with proof: $30K of the spouse's pay above what a part-time bookkeeper costs, an $18K family truck, $14K of owner health insurance and a $22K one-time lawsuit. That is $84K. Rent the owner pays himself is $12K above market. He also has a rough $20K of "personal stuff" with no receipts.

Likely SDE: $180K + $150K + $45K + $84K + $12K + 75% of $20K = $486K.
Low case, if a buyer trims 25% of the itemized list and half the rough total: $180K + $150K + $45K + $63K + $12K + $10K = $460K.
Adjusted EBITDA: $486K minus a $100K manager salary plus 20% for taxes and benefits ($120K) = $366K. That is well under $1M, so this shop is priced on SDE.

At BizBuySell's published median of 2.24x SDE, used here only as an illustration, the $26K gap between the low and likely cases is worth about $58K of price. Getting receipts for the rough $20K costs an afternoon.

Common mistakes

Adding back your whole salary on a larger company. Past about $1M of EBITDA, buyers subtract a manager's salary.
Running the house remodel through the company and not tracking it. It may be a fair add-back, but only with invoices.
Forgetting the negatives. A buyer will find the unpaid family help and the 1099 plumbers anyway.
Calling every repair one-time. Show three years of repair history so the real one-offs stand out.
Cleaning up the books the year you sell. Buyers want two to three years that match your tax returns.
Keeping the surge revenue and adding back the surge costs. Buyers will normalize both.

Questions to ask your CPA, attorney or broker

Which of my add-backs would a quality of earnings review accept, and what proof do I still need?
Is my company likely to be priced on SDE or adjusted EBITDA, and what manager salary would a buyer subtract?
What is a market rent for my shop and yard, and should I sign a new lease before I sell?
Are any of my family payroll costs or 1099 plumbers a risk in diligence?
What personal costs should I stop running through the company now, before the years a buyer will review?
If I am the master plumber of record, how will a buyer price replacing me?

Sources

Questions owners ask

What add-backs do buyers accept on a plumbing company?

Your own pay, interest and depreciation are almost always accepted because they tie to your tax return. Personal and one-time costs are accepted when you can show invoices, payroll records or statements that prove them.

Can I add back my spouse's salary?

Only the part that is above what the job would cost to hire. If your spouse does the books ten hours a week, a buyer still needs a bookkeeper, so only the pay above that market cost is an add-back.

Do I add back my whole salary when I sell?

On a small owner-run shop priced on SDE, yes, all of one owner's pay. On a larger company priced on adjusted EBITDA, the buyer subtracts a market salary for the manager who will replace you.

Can I add back cash jobs that were never reported?

Not in any way a lender will accept. SBA lenders check seller numbers against IRS transcripts, so income not on your return is very hard to count. Talk to your CPA about this before you go to market.

Who would buy my plumbing business?
Selling a plumbing business to private equity, a local rival or an SBA buyer: who buys companies your size, what each pays for, and who is active now.
What are the steps to sell my plumbing company?
How to sell a plumbing business from three years out to closing: the license plan, service mix, membership plans, buyers, the LOI, diligence and handover.
How do I sell my roofing company, step by step?
How to sell a roofing company in nine steps, from deciding what you want to the handover. Buyers, the LOI, due diligence, closing and what to ask.

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This is an educational estimate, not an appraisal. RetireFromTrades gives an illustrative range based on what you told us and on general market information. It is not a formal business valuation or appraisal, and it is not an offer to buy your business. We are not a business broker, M&A adviser, CPA, lawyer or financial adviser, and nothing here is legal, tax, accounting or investment advice. Real offers depend on your actual financial records, buyer diligence, deal terms and market conditions, and can be higher or lower than this range. Before you make any decision, talk to a licensed professional. If you ask, we can introduce you to an independent licensed business broker; we do not broker, negotiate or take part in any sale.