SDE and EBITDA calculator
Type the numbers from the last full year's profit and loss statement. The tool shows SDE, EBITDA and adjusted EBITDA, and says which one a buyer of this size would price the business on.
From the profit and loss statement (example values: replace them with yours)
Owner perks and add-backs (costs that stop with the sale)
If a buyer hires a manager instead of running it
How the numbers build up
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SDE (seller's discretionary earnings) = net profit + interest + taxes + depreciation and amortization + one owner's salary + owner perks and one-time costs. It is what one owner-operator takes home from the business, and the number most businesses under about $2 million are priced on. EBITDA = net profit + interest + taxes + depreciation and amortization, with everyone's pay left in. Adjusted EBITDA = EBITDA + the add-backs, minus a market salary for the person who will run the business. Read What is SDE? and What is EBITDA? for worked examples, and What are add-backs? for which ones survive diligence.
Questions people ask
What is the difference between SDE and EBITDA?
SDE adds the owner's salary and personal perks back to profit, because one owner-operator will take all of that money. EBITDA leaves a market salary for a manager in the costs. SDE is always the larger number, by about one owner's pay.
Which add-backs do buyers and lenders accept?
Costs that stop with the sale: the owner's salary and payroll taxes, personal vehicle, health insurance, travel and meals, a family member on payroll who does not work, and genuine one-time costs such as a lawsuit or a move. They dispute add-backs with no paper trail and "one-time" costs that happen every year.
When do buyers switch from SDE to EBITDA?
In the IBBA and M&A Source Market Pulse survey, deals under $2 million in price are reported as multiples of SDE and deals from $2 million up as multiples of EBITDA. In practice the switch happens when the buyer will hire a manager rather than run the business.
Is adjusted EBITDA the same as SDE minus a manager's salary?
Close to it. Adjusted EBITDA is EBITDA plus the accepted add-backs, with a market salary for the person who will run the business left in the costs. If the owner runs it today, that is SDE minus a market manager salary.
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Book a free callEstimates only, from the figures you type; a buyer or lender will recast the books from tax returns and bank statements. Acquisitions.com is an advisory firm, not a broker-dealer or a lender; financing comes from third-party lenders and investors. Not financial advice.