SDE (Seller's Discretionary Earnings)
The earnings number that matters for most small businesses. Includes the owner's salary, benefits, and personal expenses.
SDE answers a simple question: how much money does this business put in the owner's pocket every year, all-in? It starts with net profit, then adds back the owner's salary, the owner's health insurance, the truck the business pays for, the cell phone, the family member on payroll who doesn't really work — all the ways an owner takes money out of a business besides the official paycheck. For most small businesses — anything roughly under $1M in earnings — this is the number that determines what your business sells for.
SDE is the number that determines what your business sells for if you're under roughly $1M in earnings.
Buyers using SDE want to see the owner's life inside the business clearly.
