Seller’s Discretionary Earnings

What, Why and How’s of SDE

Small businesses are typically priced on how much the company makes – it’s earnings.  The exact metric for earnings is SDE, Seller’s Discretionary Earnings, which approximates the total sum cash flow of what an owner/operator takes out of the business.

This module will cover:

1. Why use SDE and not actual cash flow – which would theoretically be better?
2. Why exclude all those items from SDE?  (Like interest, depreciation, etc.)
3. Adjusting SDE for any wages and owner benefit
4. Adjusting SDE for occupancy costs
5. Which time periods are used to measure SDE?
6. Tax Returns and accountant reports

The first few modules are designed to prepare you to assist in a valuation of your business. This module covers the basics of SDE and why we even use SDE when valuing a business.