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Let’s TalkSeller’s Discretionary Earnings (SDE)
Pre-tax net income, plus owner’s compensation, interest, depreciation, amortization, discretionary expenses, as well as adjustments for extraordinary, non-operating revenue or expenses, and non-recurring expenses or revenue.
See Also
Cash flow, EBITDA, net income.
Tips
Seller’s discretionary earnings (SDE) is also referred to as seller’s discretionary cash flow, adjusted cash flow, owner benefit, recast earnings, or normalized earnings, although seller’s discretionary earnings is the official name advocated by the International Business Brokers Association (IBBA). SDE is commonly used for small businesses, while EBITDA is more commonly used for mid-sized businesses. The main difference between SDE and EBITDA is that SDE includes the owner’s compensation, whereas EBITDA does not.
Related Resources
Adjusting Financial Statements: A Complete Guide
EBITDA | Definition, Formula & Example – A Complete Guide
Seller’s Discretionary Earnings (SDE) | Definition & Examples
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