What Is SDE? Seller’s Discretionary Earnings Explained In Full

What Is SDE? Seller’s Discretionary Earnings Explained In Full

What is SDE and what does it mean for business owners?

What is the purpose of SDE?

SDE vs EBITDA

How is SDE calculated?

  • Owner’s remuneration
  • Rent payments for home office
  • Car payments
  • Charitable donations
  • Owner’s business travel expenses
  • Mobile phone or computer expenses

What expenses can’t be classified as add-backs?

  • Cost of goods sold
  • Marketing & promotional expenses
  • Sales tax
  • Employee’s medical insurance
  • Employee’s travel expenses
  • Warehousing expenses

Why is SDE important when selling a business

How to improve your SDE

Bringing It Together: An SDE Example

  • The company pays the owner a salary of $100,000
  • The cost of goods sold for the year was $250,000
  • They spent $100,000 on operational expenses such as shipping and fulfilment
  • Also $120,000 on marketing
  • They paid $500/month for the owner’s car lease
  • The owner donated $1,000 to charity on behalf of the company

Why Should I Listen To You, Ben?

Ben Leonard Ecommerce Consultant

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Ben Leonard

Ben Leonard

31 Followers

Best known as the founder of Beast Gear, Ben Leonard is the classic millennial entrepreneur. Ben grew an international 7-figure business and sold after 3 years