Seller's Discretionary Earnings (SDE)
Net income plus owner's salary, benefits, and non-recurring expenses added back. The standard profitability measure for businesses under $1M in earnings, because it shows what a new owner-operator would actually take home.
Where This Matters
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Enterprise Value (EV)EBITDA MultipleQuality of Earnings (QoE)Add-BacksDue DiligenceLetter of Intent (LOI)Holdback (Escrow)Earn-OutAsset SaleStock Sale (Equity Sale)GoodwillPersonal GoodwillCommunity PropertySeparate PropertyPereira MethodVan Camp MethodTransmutationBuy-Sell AgreementShotgun Clause (Russian Roulette Clause)Right of First Refusal (ROFR)View all →