SDE Calculator (Seller Discretionary Earnings)

Seller's Discretionary Earnings (SDE) is a commonly used cash-flow proxy for small owner-operated businesses. It starts from reported profit and adds back owner-specific compensation, nonrecurring items, and financing or tax effects that are not required by a new owner.

This calculator offers three workflows: a standard SDE built from net income, a reconciliation-first workflow for careful add-backs, and an alternate path starting from EBIT. Use the workflow that matches your accounts and reconciling documentation.

Updated Nov 25, 2025

Calculation method

Compute SDE starting from reported net income and adding back owner-specific compensation, financing, tax, accounting and one-time items to estimate cash flow available to an owner-operator.

Inputs

Net income (after-tax profit)

Min 0

EBIT (if using EBIT workflow)

Min 0

Owner salary / draw (add-back)

Min 0

Owner benefits (insurance, personal vehicle benefit, etc.)

Min 0

Owner personal expenses paid by the business

Min 0

Interest expense (add back if owner financing)

Min 0

Income taxes (company-level)

Min 0

Depreciation & amortization

Min 0

One-time / nonrecurring expenses (add-backs)

Min 0

Rent paid to owner (add-back if applicable)

Min 0

Non-operating income (to deduct)

Min 0

Other adjustments (legal, one-off credits/debits)

Min -100000000

Total revenue (for margin calculation)

Min 0

Results

Updates as you type

Seller's Discretionary Earnings (SDE)

$0.00

SDE margin (%)

—

Output	Value	Unit
Seller's Discretionary Earnings (SDE)	$0.00	USD
SDE margin (%)	—	%

Primary result$0.00

Visualization

Points

Methodology

Primary formula: SDE = Net income + Owner compensation + Owner benefits + Interest + Taxes + Depreciation & amortization + One-time expenses + Owner rent (if applicable) + Other approved add-backs − Non-operating income.

Reconciled workflows separate non-operating and one-time items first, then add owner-specific costs to reduce double-counting and improve comparability across buyers.

Security, data handling, and reporting recommendations follow controls and documentation best practices cited by leading standards bodies to support traceability and auditability of inputs.

Further resources

External guidance

Expert Q&A

Is SDE the same as EBITDA?

No. EBITDA excludes owner compensation and some owner-specific add-backs. SDE is intended for small owner-operated businesses and typically adds back owner salary and benefits to estimate cash available to an owner-operator.

Which inputs need documentation?

Nonrecurring expenses, owner personal expenses paid by the business, and unusual adjustments require source documents such as invoices, contracts, or written explanations to be credible to buyers or advisors.

How accurate is this calculator?

This tool provides an estimation framework. Accuracy depends on the quality of inputs and the completeness of reconciliations. Use this for preliminary analysis and engage a qualified accountant or valuation professional for transaction-level valuation. See accuracy and compliance notes below.

Can I use tax-deductible items as add-backs?

Only when they are owner-specific or non-operating in nature. Items required for ongoing operations should not be added back. Consult a tax professional for tax treatment implications.

Sources & citations

National Institute of Standards and Technology (NIST) — https://www.nist.gov/
International Organization for Standardization (ISO) — https://www.iso.org/
Institute of Electrical and Electronics Engineers (IEEE) — https://www.ieee.org/
Occupational Safety and Health Administration (OSHA) — https://www.osha.gov/
Internal Revenue Service (IRS) - guidance and forms — https://www.irs.gov/