Acquisition Calculator
SDE Calculator
Determine the true earnings of any owner-operated business. Enter the most recent full year's numbers from the tax return; the SDE total, breakdown, and valuation estimate update live.
Total gross revenue for the most recent full year
Net profit as reported on the business's tax return
Total W-2 salary and payroll taxes paid to the owner
Health insurance, auto, phone, travel, meals, and other personal expenses run through the business
Interest paid on business debt (loans, lines of credit)
Non-cash depreciation and amortization charges
Expenses that won't repeat (lawsuit, moving costs, equipment replacement, etc.)
Any other discretionary or non-operating expenses to normalize
What SDE is and why it matters
Seller's Discretionary Earnings is the standard measure of a small business's earning power. It represents the total financial benefit available to a single full-time owner-operator, before debt service and income taxes — the cash flow you'd actually put in your pocket if you bought the business and ran it yourself.
SDE is the metric most small businesses (under ~$1M in earnings) trade on. Read more about SDE vs. EBITDA.
Common add-backs
Add-backs are expenses that get added back to net income to arrive at SDE. They fall into two categories: owner-specific expenses (salary, benefits, perks) and non-cash or non-recurring charges (depreciation, one-time costs).
Not all add-backs are legitimate. Inflated or fabricated add-backs are one of the most common red flags in business acquisitions. Learn about the 10 red flags that kill deals.
From SDE to a valuation
Once you know the SDE, you can estimate value by applying an industry-appropriate multiple. SDE multiples typically range from 1.5× to 4× depending on industry, size, growth trends, and risk profile. Read our guide to valuation multiples.