SDE calculator: seller's discretionary earnings

SDE is pre-tax profit plus one owner's salary and benefits, interest, depreciation and genuine one-time or personal expenses - the cash one full-time owner-operator takes out of the business. It is the number most small businesses are priced on.

Updated 2026-09-23 · 1 source · By the TradeExit Guide team

SDE and adjusted EBITDA calculator

Recast tax-return profit into seller’s discretionary earnings (SDE) and adjusted EBITDA, the two numbers buyers apply multiples to.

Educational recast only. Buyers and lenders will ask you to document every add-back; undocumented ones are usually rejected.

Add-backs: which ones buyers accept

Add-backUsually accepted?What buyers want to see
One owner's salary, payroll taxes and benefitsYesW-2s, K-1s and benefit invoices
Interest, depreciation, amortizationYesTax returns; note buyers will still budget for equipment replacement
Second owner or spouse salaryOnly if they do no real workProof the role will not need replacing
One-time costs (lawsuit, move, rebrand)If truly non-recurringInvoices and a one-line explanation each
Personal expenses through the businessSometimesReceipts; large amounts invite questions about the books
"We could raise prices" or unbilled workNoBuyers pay for results you have, not ones you could have

SDE vs EBITDA

SDE assumes the buyer replaces you by working in the business. Adjusted EBITDA subtracts a market salary for a manager to do your job. Main Street buyers use SDE; PE firms and larger strategics use EBITDA, which is why the same business can show a 2.5x SDE multiple and a 4x EBITDA multiple at the same price. Next: run your valuation.

Frequently asked questions

What is SDE?

Seller’s discretionary earnings: pre-tax profit plus one owner’s compensation and benefits, interest, depreciation and amortization, and documented one-time or personal expenses.

What is a good SDE margin?

It varies by trade. Compare your SDE to revenue against peers; BizBuySell’s benchmark pages list median revenue and owner earnings by industry.

Is SDE the same as EBITDA?

No. EBITDA subtracts a market-rate salary for the owner’s role; SDE does not. For the same business, EBITDA is lower, so EBITDA multiples look higher.

Sources

  1. BizBuySell - Business valuation multiples by industry (sold Q3 2021-Q2 2026) (accessed 2026-09-23)