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Tip #145 EBITDA or SDE Play an Important Role in Valuing a Business
Sellers Discretionary Earnings (SDE) or Earnings Before Interest, Taxes, Depreciation, and Amortization (EBITDA) are two different ways of determining the profitability of a company. EBITDA is generally used for larger businesses and SDE is generally used for smaller companies. Neither calculation is officially regulated, so it takes a professional – a business broker, mergers & acquisitions advisor, or appraiser — to perform the process. These methods of valuation are then used with an industry multiple to help determine a market price.
