Definition
SDE
Seller's Discretionary Earnings — EBITDA plus owner salary and personal expenses.
Definition
Seller's Discretionary Earnings is the earnings metric used for owner-operated businesses, typically those under $2M in revenue. SDE adds back the owner's salary, personal expenses run through the business, and one-time costs to arrive at the total cash benefit available to a full-time working owner. SDE is higher than EBITDA for the same business, which means SDE margins appear higher than EBITDA benchmarks.
Formula
Worked Example
A cafe earns $80,000 EBITDA. The owner pays themselves $60,000/year from the business and expenses a $5,000 personal vehicle through it. SDE = $80,000 + $60,000 + $5,000 = $145,000.
Related Terms
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