What is SDE in business valuation?

Seller's Discretionary Earnings (SDE) is the net profit a small business produces before paying the owner. It includes operating profit plus owner compensation, owner perks (vehicle, phone, family on payroll), and one-time non-recurring expenses. Buyers use SDE as the cash-flow base for valuing owner-operated businesses.

What is a typical SDE multiple for a small business?

Small-business SDE multiples typically range from 1.5x to 3.5x for service industries, with higher bands (3x to 5x) for businesses with recurring revenue or asset-heavy operations. Industry, customer concentration, owner dependency, and recurring revenue mix drive variance within these bands.

Is an SDE calculator a formal business valuation?

No. An SDE calculator produces a preliminary heuristic for planning purposes. A formal business valuation under USPAP or IRS Revenue Ruling 59-60 standards requires a licensed appraiser reviewing financial statements, tax returns, and market comparables.

What information do I need to use the calculator?

Five numbers from your last full fiscal year: annual revenue, operating profit (pre-tax), owner compensation (W-2 + draws), owner perks (non-cash benefits), and one-time non-recurring expenses. Plus your industry.

Valuation instruments · SDE

What is the business worth?

A 60-second value-range estimate built on Seller's Discretionary Earnings — the standard metric brokers use to price owner-operated businesses. The ledger composes your number as you type.

Heuristic, not a valuation. This calculator uses wide industry multiple bands. Real-world pricing depends on lease terms, customer concentration, owner involvement, recurring-revenue mix, and current market comps. A broker review narrows the range after seeing your actual financials.

Industry If yours isn't listed, pick "General / other" — we'll apply a conservative blended range.

Annual revenue (last full year) Top-line sales — before any deductions.

Operating profit (pre-tax) After all expenses including your owner pay.

Owner compensation W-2 wages + draws you took last year.

Owner perks Personal vehicle, phone, family on payroll, etc.

One-time / non-recurring Lawsuit settlement, one-time repair, etc.

No signup. Numbers are not saved.

How SDE is calculated

SDE = operating profit + owner compensation + owner perks + one-time expenses. The "add-backs" reflect that a new owner won't necessarily take the same salary, won't pay the same perks, and won't be hit by your one-time costs.

Value range = SDE × industry multiple. The multiple widens or narrows based on industry risk, growth, and recurring-revenue mix. Public ranges here are blended heuristics — the broker review narrows the band against current market comps.

Operating profit	—
+ Owner compensation	—
+ Owner perks	—
+ One-time add-backs	—
SDE	—
Industry multiple	—