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Seller's Discretionary Earnings (SDE)

SDE is the standard valuation metric for small, owner-operated businesses (under ~$5M revenue). It answers: 'How much total money does this business put in one person's pocket?' The formula is Net Profit + Owner Salary + Owner Benefits + One-Time Expenses + Depreciation/Amortization. Brokers and marketplace platforms (Flippa, BizBuySell, Empire Flippers) use SDE multiples to price businesses for individual buyers who will operate them.

Example

A consulting firm with $95K net profit, $120K owner salary, $18K in benefits, and $10K in one-time expenses has an SDE of $243K.

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Business Valuation for Digital Businesses

A small digital business is typically worth its Seller's Discretionary Earnings (SDE) multiplied by an industry-specific multiple. In 2026, multiples range from 1.5x for consulting firms to 6.0x for SaaS businesses, depending on business type, growth, recurring revenue, and owner dependency.