SDE vs EBITDA calculator
Seller's discretionary earnings (SDE) is EBITDA plus one owner's total compensation, and is common for smaller owner-operated businesses. EBITDA assumes a hired manager at a market salary, so market-rate EBITDA = SDE − market salary. Larger companies are usually discussed on EBITDA.
Your inputs
Enter ebitda (owner pay already expensed), owner total compensation, market salary to replace the owner to see the result.
Inputs
- EBITDA
- After the owner's pay is expensed.
- Owner compensation
- One working owner's total pay.
- Market salary
- Replacement manager cost.
Outputs
- SDE
- EBITDA + owner compensation.
- Market-rate EBITDA
- SDE − market salary.
How it is calculated
SDE = EBITDA + owner compensation
Market-rate EBITDA = SDE − market replacement salary
Worked example (illustrative)
Illustrative only: EBITDA $800,000, owner pay $300,000 and a $180,000 market salary give SDE of $1,100,000 and market-rate EBITDA of $920,000.
Assumptions and limitations
- Uses one working owner; multiple owners need separate judgment.
- Market salary is your estimate.
- Multiples applied to SDE and EBITDA differ and are not interchangeable.
Questions and answers
When is SDE used?
Mostly for smaller, owner-operated businesses where a buyer will run the company.
When is EBITDA used?
For larger companies with management teams, and by most private equity buyers.
Why subtract a market salary?
A buyer must pay someone to do the owner's job.
Can I apply the same multiple to both?
No. SDE multiples are typically lower because SDE is larger.
Sources
Content reviewed October 9, 2026 by the SourceX Partnerships Team. Results are calculated in your browser; nothing you type is stored.