Free Tool

Free SDE Calculator — find your true owner earnings

Seller’s Discretionary Earnings (SDE) is the number small-business buyers price from. This free SDE calculator walks through every standard add-back — owner salary, interest, depreciation, one-time costs, and personal expenses run through the business — and gives you the figure in about two minutes. The same math, with one tweak, also produces Adjusted EBITDA.

100% private. Nothing you enter is sent or stored anywhere.

SDE & Adjusted EBITDA Calculator

Find your true earning power

Start with pre-tax profit, add back the standard items, then layer in the normalizing adjustments a buyer would accept. The result updates as you type.

1. Starting point
$

Your bottom-line profit before income taxes — the "net income before taxes" line on your P&L.

2. Standard EBITDA add-backs
$
$
3. Normalizing adjustments
$
Add back only the pay above what a hired manager would cost — not your whole salary. A buyer still has to pay someone to run the business.
$

One-off legal or consulting fees, a single large repair, a move — costs that will not repeat for a buyer.

$

Personal auto, travel, meals, phone, or insurance paid by the business.

$
$

Charitable donations, sponsorships, or other discretionary spending a buyer would not continue.

Base EBITDA$0
Total normalizing add-backs$0
Adjusted EBITDA
$0
This is the earnings figure buyers value your business on.

See what that's worth

Established businesses sell for roughly 3 to 5 times Adjusted EBITDA. Run your number through the valuation calculator, or get a real figure on a call.

Open the valuation calculator → 📞 Call (949) 393-0098

This is an estimate to help you prepare, not a formal financial statement. A buyer will confirm add-backs against your tax returns and books. The calculator runs entirely in your browser — nothing you enter is sent or stored.

The formula

How SDE is calculated

SDE is the standard yardstick for valuing owner-operated small businesses. The formula is plain math:

SDE = Net Profit + Owner’s Salary + Interest + Depreciation + Non-Recurring Expenses

In plain English: start with the bottom-line profit on your tax return and add back every dollar that does not represent the true ongoing cost of running the business. The owner’s entire compensation gets added back — that is what makes the result seller’s discretionary earnings.

SDE vs. Adjusted EBITDA

Adjusted EBITDA uses the same add-back logic with one key difference: it leaves a market-rate manager salary in the business, so Adjusted EBITDA is lower than SDE by the cost of replacing the owner. SDE is the right yardstick for an owner-operator buyer; Adjusted EBITDA is the standard for the kind of established companies BizSellDirect acquires. The calculator above computes Adjusted EBITDA — for SDE, add your full owner compensation back instead of only the excess.

Getting it right

What counts as an add-back

An add-back is a cost that will not carry over to a new owner. Get them right and your business looks as profitable as it really is — overreach and a buyer will discount everything.

Legitimate add-backs
  • Interest, depreciation, and amortization
  • Owner pay above a market manager's salary
  • Personal auto, travel, meals, and phone
  • Non-working family members on payroll
  • One-time legal, consulting, or repair costs
  • Charitable donations and sponsorships
Common mistakes to avoid
  • Adding back your entire owner salary
  • Normal, recurring operating expenses
  • Costs a buyer will keep paying (rent, payroll, software)
  • "Planned" expenses that have not actually happened
  • Add-backs you cannot document on a tax return
  • Inflating one-time costs that recur every year
Common questions

About SDE and Adjusted EBITDA

What is Adjusted EBITDA?
EBITDA is earnings before interest, taxes, depreciation, and amortization. Adjusted EBITDA goes one step further: it also adds back owner-specific and one-time costs that will not continue under a new owner. It is the cleanest picture of what the business actually earns — and the number buyers price from.
Why do I only add back part of my salary?
Because a buyer still has to pay someone to do your job. If you pay yourself $300,000 but a hired general manager would cost $120,000, only the $180,000 difference is a true add-back. Adding back the full salary overstates earnings, and an experienced buyer will catch it — which damages trust in every other number.
How is this different from SDE?
Seller's Discretionary Earnings (SDE) adds back one owner's full compensation and is typically used for smaller, owner-operated businesses. Adjusted EBITDA keeps a market-rate manager cost in the business and is the standard for the established companies BizSellDirect acquires. We value on Adjusted EBITDA.
How does this connect to my business's value?
Value is Adjusted EBITDA multiplied by a market multiple — typically 3 to 5 times for established small businesses. Once you have your Adjusted EBITDA here, the valuation calculator estimates the multiple and the range.
Is my information saved or shared?
No. The calculator runs entirely in your browser. Nothing you enter is transmitted, logged, or stored — there is no form submission and no sign-up.

Know your number? Let's talk value.

Once you have your Adjusted EBITDA, a 15-minute call turns it into a real, confidential valuation — no preparation, no fees, no obligation.

📞 Call (949) 393-0098 📅 Book a call Send a message

BizSellDirect LLC · 260 Newport Center Drive, Suite 100 · Newport Beach, CA 92660

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