What Seller's discretionary earnings (SDE) means
Buyers and brokers often value content, ecommerce and small SaaS sites as a multiple of SDE or net profit. Clean financial records make the figure easier to prove.
Why it matters for your website
If you ever plan to sell your online business or buy one, SDE is often the number the price is built on. Clean records that clearly show your add-backs make your business easier to value and can help you get a fairer price.
Example
A hypothetical affiliate site shows a modest net profit, but after adding back the owner's salary and a one-time redesign cost, its SDE is noticeably higher, and buyers base their offer on that.
Tips
- Keep business and personal expenses in separate accounts from day one.
- Document every one-off cost so it can be added back with proof.
- Track SDE monthly, not just when you are thinking about selling.
Common mistakes
- Adding back ordinary costs that a new owner would still have to pay.
- Mixing personal spending into the business so buyers cannot trust the numbers.
Questions about Seller's discretionary earnings (SDE)
What is Seller's discretionary earnings (SDE)?
A profit figure used to value small online businesses, adding back the owner's pay and one-off costs.
How is SDE different from EBITDA?
Both start from profit and add back items like interest and depreciation, but SDE also adds back one owner's pay and perks. SDE is common for small owner-run businesses, while EBITDA is used more for larger companies with management teams.
How is SDE used to value a website business?
Buyers and brokers usually apply a multiple to SDE to estimate a price. The multiple depends on things like growth, traffic sources, risk and how much work the business needs.
