Recasting — also called normalizing or adjusting financial statements — is the process of starting with tax return net income and adding back legitimate owner benefits and non-recurring expenses to arrive at Seller's Discretionary Earnings. Recasting is standard practice in business sales and is expected by buyers and lenders — but it must be done honestly and supportably.
What Can Be Added Back
Standard add-backs include: owner W-2 compensation and bonuses, owner health insurance premiums, owner retirement plan contributions (SEP, SIMPLE, solo 401k), personal use of business vehicle (documented mileage), personal cell phone and home office expenses if run through the business, non-recurring professional fees (legal costs from a one-time dispute), and depreciation and amortization. Each add-back should be clearly documented.
What Cannot Be Added Back
Non-recurring revenue, costs that would need to be replaced by a buyer (key employee salaries at market rate), or expenses that are genuinely necessary for operations are not legitimate add-backs. Aggressive add-backs that buyers will contest in due diligence cause more damage to a deal than simply presenting accurate numbers. Credible recasting that withstands scrutiny builds buyer confidence; aggressive recasting that gets challenged destroys it.
Your business broker should prepare a formal SDE Recasting Statement as part of the Confidential Business Review. This document presents the adjustments transparently, with line-by-line documentation of each add-back and the rationale supporting it.
Recast Seller’s Discretionary Earnings, then apply a planning multiple for this Illinois business. Replacement labor is subtracted. This is a planning tool, not an appraisal.
Before debt, working-capital peg, holdback, and tax. Educational only.
What this Illinois guide is for
Understanding Recasting Financial Statements for a Business Sale is a working answer for owners and buyers. We will not invent a statewide average sale price. We will show the earnings math, the Illinois clocks that delay a close, and the questions a serious counterparty will ask.
Marketplace context from BizBuySell’s Q2 2026 Insight Report (median reported sale $349,250, 2.7× cash-flow multiple, 14% of owners with a professional valuation) is context — not your quote.
Documents to gather this week
- Three years of signed business tax returns and matching P&Ls
- Year-to-date P&L, balance sheet, and three months of bank statements
- Current lease, amendments, and a plain-English remaining term
- License and permit list, including who holds each card
- Top-customer concentration (names redacted until an NDA)
A simple Illinois close calendar
Plan six to twelve months from cleanup to close on a prepared Main Street deal. Start CBS-1 and any Chicago or Cook notices at letter-of-intent, not the week of funding. Landlord consent often takes longer than the lender.
Related pages on this site
Educational only — not legal, tax, or a formal appraisal. Confirm bulk-sale notices, licenses, and tax allocation with counsel and a CPA.
Questions
No. This is education and planning math. A professional opinion of value is a confidential conversation. We work on a success fee if you engage a sale process. There is no file-upload portal.
Start with adjusted seller’s discretionary earnings, then a vertical planning band. A marketplace average is context, not your quote.
Personal professional licenses do not transfer. Municipal registrations and state notices have their own calendars. Confirm the path before you grant exclusivity.
Most prepared Main Street sales take about six to twelve months from cleanup to close. License transfers, landlord consent, and SBA underwriting add weeks.
CBS-1 is the Illinois bulk-sale notice. File it at least ten business days before an asset transfer that meets the statute. Late filing can put Illinois tax risk on the buyer.