Seller's Discretionary Earnings Calculator

About this calculator

Seller's Discretionary Earnings (SDE) is the standard measure of true owner cash flow used to value small, owner-operated businesses, calculated by starting with net income and adding back the owner's salary, interest expense, depreciation and amortization (similar to EBITDA), and any other one-time or personal discretionary expenses run through the business. This normalizes earnings to reflect what a new owner-operator would actually take home, since a small business's reported net income is often distorted by the current owner's compensation choices.

Business brokers and buyers use SDE — rather than EBITDA, which is more appropriate for larger companies with professional management — as the standard earnings base for valuing businesses typically under a few million dollars in revenue, then apply a valuation multiple (commonly ranging from roughly 2x to 4x SDE depending on industry, growth, and risk) to arrive at an estimated sale price. Sellers preparing to list a business, and buyers evaluating a listing, both rely on this figure as the starting point of nearly every small-business valuation conversation.

This calculator takes net income, owner salary, interest, and depreciation, then returns SDE and applies your chosen valuation multiple to estimate a sale price, so you can quickly gauge what a business might be worth.