Small business valuation and acquisition guides

Straight answers to the questions buyers ask before making an offer — how earnings are measured, what multiples are normal, and how to pull a listing apart.

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• What is SDE (seller's discretionary earnings)? — SDE (seller's discretionary earnings) is a small business's net profit plus owner salary, perks and one-off costs. See the formula, a worked example and how SDE sets price.
• SDE vs EBITDA: what is the difference? — SDE adds back one owner's salary; EBITDA does not. See the difference, when each is used, how to convert between them, and why the multiple changes with the metric.
• How to value a small business — A practical method to value a small business: normalize earnings to SDE, pick a defensible multiple, add assets, subtract debt, then stress-test with debt service and cash-on-cash return.
• What is a good SDE multiple? — Most small businesses sell for 2x to 4x SDE. See typical ranges by earnings size and industry, and the factors that push a multiple up or down.
• How much should you pay for a business? — Set your maximum price from verified SDE, a risk-adjusted multiple and what the debt can service. Includes a worked example with coverage ratio and cash-on-cash return.
• How to analyze a business listing — A step-by-step checklist for evaluating a business for sale: verify the earnings, recalculate the multiple, test the financing, and spot the red flags before you sign an LOI.