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Small Business · Exit Planning
Owner Salary Normalization
Owner pay in a small business is rarely a market wage. It is a mix of salary, distributions, and personal expenses run through the company. This tool separates what a replacement manager would actually cost from what the owner takes, so both seller discretionary earnings and normalized EBITDA come out on a comparable basis.
Data: 2026 (SS wage base $184,500; market wage is user-supplied)
Inputs STEP 1
Reported earnings
From the P&L, before any add-backs.
Not expected to repeat under a buyer.
Each additional owner's package is normalized the same way.
Owner compensation and add-backs
Wages actually run through payroll.
Non-payroll cash taken out.
Leave at 0 to have the tool compute it.
Premiums the company pays for the owner.
Employer side only.
Non-business portion.
Meals, memberships, family payroll above market.
Replacement manager benchmark
What it would cost to hire someone to do the owner's job.
Payroll taxes, insurance, retirement, as a percent of wage.
Used to flag under-market or over-market staffing.
Payroll tax rates and valuation multiple
2026 SSA contribution and benefit base. Overridable.
Shows how normalization moves an SDE-based valuation.
This is an illustrative estimate, not tax advice. Reasonable compensation for an S corporation owner depends on your full facts and on current IRS guidance, which can change. Consult a CPA or tax attorney.
Normalized EBITDA
--
Net income plus owner package plus one-times, minus replacement cost