What is SDE?
Seller’s discretionary earnings — what the business actually put in the owner’s pocket. It’s the number small businesses are priced on, and the one listing after listing leaves out.
Net profit understates a small business, because the owner’s own pay, their car, and one-off costs are all sitting in the expenses. SDE adds those back, so two businesses with different owner salaries can be compared at all.
The formula
Net profit + owner’s salary and benefits + one-off and personal expenses = SDE
“One-off” means it won’t exist for you: the owner’s truck, a legal bill from a dispute that’s finished, the salary of a family member who doesn’t work there. It does not mean anything the seller wishes hadn’t happened.
SDE$171,000at a 3× multiple that’s a business worth about $513K — check it against real listings
What it looks like on real listings
Three businesses for sale right now. Note how differently revenue converts into owner earnings — that gap is the whole reason you price on SDE and not on sales.
| Business | Revenue | SDE | SDE margin | Asking | Multiple |
|---|---|---|---|---|---|
| Construction & civil · Vancouver | $2.1M | $241K | 11% | $200K | 0.8× |
| Restaurants & food service · High Prairie | $486K | $104K | 21% | $1.2M | 11.5× |
| Fitness, recreation & events · Toronto | $214K | $77K | 36% | $400K | 5.2× |
When a listing doesn’t publish it
It happens constantly: 204 of the 514 businesses for sale we track publish no SDE or cash flow at all. That isn’t automatically a bad sign — plenty of brokers hold it back until you sign an NDA — but it does mean nobody, including us, can tell you whether the asking price is sane. We grade those listings down and say so on the page.
Ask for it in the first email, along with three years of financials. If the answer is a revenue figure and a story, that’s your answer.