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-back | Usually accepted? | What buyers want to see |
|---|---|---|
| One owner's salary, payroll taxes and benefits | Yes | W-2s, K-1s and benefit invoices |
| Interest, depreciation, amortization | Yes | Tax returns; note buyers will still budget for equipment replacement |
| Second owner or spouse salary | Only if they do no real work | Proof the role will not need replacing |
| One-time costs (lawsuit, move, rebrand) | If truly non-recurring | Invoices and a one-line explanation each |
| Personal expenses through the business | Sometimes | Receipts; large amounts invite questions about the books |
| "We could raise prices" or unbilled work | No | Buyers 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
- BizBuySell - Business valuation multiples by industry (sold Q3 2021-Q2 2026) (accessed 2026-09-23)