Seller's Discretionary Earnings (SDE)

Seller's Discretionary Earnings (SDE) is the total pre-tax profit a single owner-operator earns from a business, adding back the owner's salary, benefits, and one-off or non-essential expenses. It's the profit base most small online businesses are valued on. For example, a business with $300,000 revenue, $150,000 costs, and a $60,000 owner salary has an SDE of $210,000; at a 3x SDE multiple it would list around $630,000. Buyers scrutinize the add-backs closely, since aggressive add-backs inflate SDE.