Earnings before Interest, Taxes, Depreciation and Amortization is just one measure of a company’s operating efficiency. “EBITDA” typically assumes a salary has been paid for a professional manager and is used for larger companies. “SDE” or Seller’s Discretionary Earnings includes everything in EBITDA, plus the salary paid for a working owner/operator and is used for smaller businesses. But there are other factors and adjustments that can play a role in valuing a company as well, such as age of equipment, location, quality of customers, etc. Buyers for a business may take a close look at either EBITDA or SDE in determining their level of interest and the amount of their offer. Click here to learn more.
Tip 077 EBITDA or SDE are popular ways to determine a basis for company value.
- by Lisa Riley
