SDE Calculator

What is SDE?

SDE — Seller's Discretionary Earnings — measures the full financial benefit a single owner takes from a business in a year. It is the metric most business brokers use to value small, owner-operated companies, because it reflects what a new owner-operator could realistically earn.

How is SDE calculated?

Start with net profit and add back the costs that are specific to the current owner:

• Owner salary and benefits
• Interest, depreciation and amortization
• One-time and non-recurring expenses
• Personal or discretionary expenses run through the business

The calculator sums these into your SDE and shows each line so the number is transparent.

SDE vs EBITDA

EBITDA adds back interest, taxes, depreciation and amortization. SDE does all of that and adds back one owner's compensation and discretionary spending. For a small business, SDE is usually the larger, more relevant figure; for a larger company with a management team, EBITDA is standard.

From SDE to business value

Small businesses typically sell for a multiple of SDE — often around 2x to 4x depending on industry, size and risk. There is no single universal multiple, so this calculator uses an industry-specific range to produce a low, typical and high indicative value. For a fuller picture, use the small business valuation calculator or the business valuation calculator.

Example

A business with $60,000 net profit that pays its owner a $50,000 salary has an SDE of at least $110,000 before other add-backs. At a 2.5x industry multiple, that suggests an indicative value around $275,000 — shown as a range, since real multiples vary.