SDE vs EBITDA
Which earnings number applies to your business — and why most small businesses use SDE, not EBITDA.
SDE includes the owner's compensation. EBITDA doesn't. That's the whole difference, but it changes the math significantly. A business with $200K in net profit and $200K in owner salary shows $400K in SDE and $200K in EBITDA. The right metric depends on who's buying. Individual buyers using SBA loans use SDE — they're buying a job. Private equity firms and strategic acquirers use EBITDA — they're buying a business that runs without the owner. Roughly speaking: under $1M in earnings, SDE is what matters. Over $1M, EBITDA takes over.
The right metric depends entirely on who's buying — and the wrong one in front of the wrong buyer changes the conversation.
Buyers know which metric they use before they ever see your numbers.
