SDE Calculator
Calculate your Seller's Discretionary Earnings (SDE) with a clear breakdown of every owner add-back, plus an indicative business value using an industry SDE multiple.
Written by the CalcBundle Research & Editorial Team · Reviewed by the Quality Review Team · Transparent formulas · results are estimates, not advice. · Updated
Seller's discretionary earnings
Enter your net profit and owner add-backs to calculate SDE.
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.
Why SDE is the right lens for owner-operated businesses
When one person owns and runs a business, the profit reported on the tax return dramatically understates the real financial benefit that owner receives. They may pay themselves a salary, run a vehicle or phone through the business, and take other perks — all legitimate, but all reducing reported profit. A prospective buyer does not care about the current owner's particular choices; they care about the total earnings available to whoever runs the business next. SDE reconstructs exactly that: the complete pool of money a single owner-operator can expect to take out in a year. This is why it, rather than net profit, is the number business brokers and small-business buyers actually negotiate around.
Worked example
A business shows $60,000 of net profit and pays its owner a $50,000 salary. Adding that salary back gives an SDE of at least $110,000 before any other add-backs — and once you include, say, $8,000 of depreciation and a few thousand in personal expenses run through the books, the SDE climbs further. At a 2.5x industry multiple, a $110,000 SDE points to an indicative value around $275,000. Nudge the multiple to 3x for a lower-risk, more transferable business and the same earnings suggest $330,000 — which is why both the add-backs and the multiple matter so much to the final figure, and why the calculator presents a range rather than a single number.
Frequently asked questions
What is SDE?
SDE (Seller's Discretionary Earnings) is the total financial benefit a single owner-operator gets from a business. It takes net profit and adds back the owner's salary, benefits and discretionary or one-time expenses, plus interest, depreciation and amortization.
Who uses SDE?
SDE is the standard earnings measure for valuing small, owner-operated businesses — the kind bought and sold through business brokers. Larger companies are usually valued on EBITDA instead.
How is SDE calculated?
SDE = Net Profit + Owner Salary + Owner Benefits + Interest + Depreciation + Amortization + One-Time Expenses + Personal/Discretionary Expenses + Non-Recurring Expenses. The calculator shows each add-back so you can see the build-up.
What is the difference between SDE and EBITDA?
Both add back interest, taxes, depreciation and amortization. SDE goes further and also adds back one owner's salary and discretionary spending, because a new owner could run the business themselves. SDE is therefore usually higher than EBITDA for a small business.
What is a fair SDE multiple for a small business?
Most small owner-operated businesses sell for somewhere between 2x and 4x SDE, but the exact multiple depends heavily on the specifics. Businesses with recurring revenue, low owner dependence, diversified customers and steady growth command the higher end, while those reliant on the owner, concentrated in a few customers, or in decline sell lower. The multiple is really a measure of risk and transferability: the easier and safer it is for a new owner to step in and keep the earnings flowing, the more buyers will pay.
Why are add-backs so important — and so scrutinised?
Add-backs are what turn reported net profit into a true picture of owner benefit, so they can significantly raise the valuation. But because they raise the price, buyers examine them closely. Legitimate add-backs — the owner's salary, genuine one-time costs, personal expenses run through the business — are widely accepted. Aggressive or vague add-backs erode a buyer's trust and can sink a deal. The key is that every add-back should be defensible with documentation, which is why a transparent, line-by-line SDE build-up matters.
Related calculators
Small Business Valuation
A simpler valuation for owner-operated businesses, based on SDE and seller's discretionary earnings.
Business Valuation
Estimate your company's value with revenue, EBITDA and SDE multiples, adjusted for growth and risk.
EBITDA
Calculate EBITDA and EBITDA margin from net income or operating profit.
Disclaimer. This calculator provides estimates for informational purposes only. Results are based on the information you enter and the assumptions used by the calculator. Actual financial, tax, business valuation, lending, marketplace or investment outcomes may differ. Consider consulting a qualified professional for decisions involving significant amounts of money. Business valuation is an estimate. The indicative value is illustrative and actual sale prices vary by buyer demand and deal terms.