Buyers do not value a fishing lodge on the net income line of your tax return. They value its normalized earnings: net income with the owner’s wages and perks, interest, depreciation and one-time costs added back. For an owner-operated lodge this figure is called seller’s discretionary earnings (SDE). For a larger lodge run by paid managers, buyers use EBITDA. This page shows how to calculate both and which add-backs a buyer will accept. It is part of our guide How Much Is My Fishing Lodge Worth?
What is seller’s discretionary earnings (SDE)?
SDE is the total financial benefit the business provides to one full-time owner-operator in a year. It starts with net income before tax and adds back:
- The owner’s salary, wages and payroll costs
- Personal expenses run through the business
- Interest on business loans
- Depreciation and amortization (capital cost allowance)
- One-time, non-recurring expenses
SDE answers a buyer’s question: “If I run this lodge the way you do, how much will it give me each year to pay my loan and pay myself?”
What is EBITDA, and when does it apply instead?
EBITDA is earnings before interest, taxes, depreciation and amortization. Unlike SDE, it does not add back the owner’s wages. Instead, it deducts a market wage for the manager who would replace the owner. EBITDA is used when a lodge is large enough that the buyer is unlikely to run it personally, or when the buyer is an investor or an existing operator adding another property.
Most family-run lodges are valued on SDE. A lodge with several managers, outposts and staff may be valued on EBITDA. If you are unsure, calculate both.
Which add-backs will a buyer accept for a lodge?
A buyer accepts an add-back when it meets two tests: the expense will not continue under the new owner, and you can prove it. Common lodge add-backs include:
- Owner and family wages above market. If your spouse is paid more than you would pay a hired employee for the same work, the difference can be added back. If family members work for free, a buyer will deduct a market wage instead.
- Personal use of lodge assets. A truck, boat or cabin used by the family, with costs paid by the business.
- Personal expenses. Personal travel, phones, insurance or meals paid by the business.
- One-time repairs. Storm damage, a new septic field or a roof, if they will not recur in the next few years.
- One-time professional fees. A lawsuit, a refinancing or a past restructuring.
- Non-operating income or costs. Rent on an unrelated property, or interest on investments.
What will a buyer not accept as an add-back?
- Routine maintenance. Docks, motors and cabins need regular upkeep. Calling it one-time does not make it so.
- Unreported cash. Income not on your books cannot be verified, so buyers and lenders ignore it. Report all revenue for the years before a sale.
- Equipment replacement. Boats, motors and vehicles wear out. Buyers will set aside a yearly amount for replacement, whether or not depreciation is added back.
- Expenses you cannot document. Without receipts or a clear record, an add-back is a claim, not a number.
Clean records are the first item in what raises and lowers a lodge’s sale price.
Free report: Prepare Your Lodge for Sale. Includes a calculator for your baseline revenue and open capacity, the starting point for your earnings. Use the form at the end of this page.
A worked example
The figures below are invented for illustration only. They are not typical of any lodge.
| Line | Amount (CAD) |
|---|---|
| Net income before tax (from statements) | 60,000 |
| Add: owner’s salary | 50,000 |
| Add: personal truck and phone costs paid by the lodge | 8,000 |
| Add: interest on the business loan | 12,000 |
| Add: depreciation (capital cost allowance) | 30,000 |
| Add: one-time storm damage repair | 15,000 |
| Seller’s discretionary earnings (SDE) | 175,000 |
| Less: market wage for a hired manager | (55,000) |
| EBITDA (adjusted) | 120,000 |
A buyer would then deduct an annual allowance for replacing boats, motors and equipment before deciding what the lodge can support. Notice how far each figure sits from the 60,000 shown on the statements. Without the adjustments, the owner would be valuing the lodge on less than half of what it provides.
How many years of earnings do buyers use?
Most buyers look at three years. If earnings are steady, they may average them. If earnings are rising, they may weight the most recent year more heavily, but they will want proof the trend is real, such as advance bookings and rebook rates. If earnings are falling, they will usually use the latest year or a lower figure. Explain any unusual year in writing: a fire, a late ice-out, a road closure, a family illness.
How do I prove my add-backs?
Prepare a one-page normalization schedule for each year. For every add-back, list the amount, what it was, why it will not continue, and where the evidence is (invoice, payroll record, bank statement). Have your accountant review it. A schedule prepared before you list shows a buyer you expect scrutiny and are ready for it.
How do seasonal revenue and deposits affect earnings?
Lodges take deposits months before guests arrive. Make sure each season’s revenue is recorded in the year the guests came, not the year the deposit arrived, or your earnings will jump around from year to year. Separate guest packages, boat and guide fees, store sales, fuel and other revenue so a buyer can see where earnings come from. The revenue calculator in our free report helps you see how occupancy and group size drive that revenue.
Frequently asked questions
Is SDE the same as profit? No. SDE adds back the owner’s pay and non-cash and one-time costs, so it is usually much higher than reported profit.
Can I add back the cost of my family living at the lodge? Only costs that are truly personal and documented. Housing that comes with the job may be a cost a new owner also bears.
Should my accountant prepare the schedule? Ideally, yes, or at least review it. Buyers trust numbers an accountant stands behind.
What multiple applies to my SDE? It depends on risk, tenure and transferability. See lodge valuation methods compared.
Get the free report: Prepare Your Lodge for Sale
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General information only; not a valuation, tax or financial advice. As of October 2026.