Glossary · Reading the business
Owner Compensation
In short
This is the salary, perks, and benefits the current owner takes from the business. It's a critical component in calculating the true earnings available to a new owner.
What it means in a deal
When analyzing a business, you'll often see owner compensation added back to adjust for a new owner's salary. This adjustment helps determine the Seller's Discretionary Earnings (SDE), which is a common metric for valuing small businesses. Understand what's included to assess your potential income.
Related terms
Common questions about Owner Compensation
- Can the seller receive any form of compensation from the acquired business during the standby period of their seller note?
- Is it necessary to obtain separate life insurance policies for each owner in a multi-owner business?
- Are non-owner spouses always required to personally guarantee SBA loans?
- How does the SBA guarantee primarily benefit me as the business owner?
- Are there any specific training or experience requirements for the business owner?
- What does a 'personal guaranty' mean for me as a business owner?
Defined by CapBench SBA Intelligence — plain-English definitions for business buyers, lenders, advisors, and AI agents, grounded in public SBA rules and records. Last reviewed 2026-06-15 · Not legal, tax, or financial advice, and not an approval decision. Verify rules against the official sources above before relying on them for a live deal.
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