Seller's Discretionary Earnings Calculator
Calculate the seller's discretionary earnings (SDE) for your ecommerce brand
Use our SDE calculator to understand the value of your interest in your business. Whether you're looking to sell your business, add financing, or give yourself a better understanding of your value, we can help.
As a small business owner, if you ever considered selling your business or bringing in a new investor, you've likely heard of seller's discretionary earnings (SDE).
SDE allows you to strip away all those 'variables' like your salary, personal expenses and perks, and non-recurring transactions to get more visibility (and to give more visibility to potential buyers or investors) of the true value of your business.
To read more about how SDE is calculated, check out our blog post.
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Seller's discretionary earnings (SDE) calculator FAQs
Discretionary items are expenses that the business paid but are really a personal benefit to the owner, such as medical or life insurance, personal travel, personal cars, personal meals/entertainment, and social club or gym memberships.
To be considered a discretionary item, each expense must meet all four of the following conditions:
- It benefits the owner(s)
- It does not benefit the business or its employees
- It's paid for by your business and expensed on your business's tax returns and P&Ls
- It's documented and verifiable as a discretionary expense.
Discretionary items are expenses that the business paid but are really a personal benefit to the owner, such as medical or life insurance, personal travel, personal cars, personal meals/entertainment, and social club or gym memberships.
To be considered a discretionary item, each expense must meet all four of the following conditions:
- It benefits the owner(s)
- It does not benefit the business or its employees
- It's paid for by your business and expensed on your business's tax returns and P&Ls
- It's documented and verifiable as a discretionary expense.
To value your ecommerce business, a valuation expert would use multiple used for other similar ecommerce businesses that have recently sold and apply them to your SDE to get a value.
For example, if your SDE is $300,000 and you receive an SDE multiple of 2.5x, then the business would have an implied value of $750,000 ($300,000 times 2.5x). For ecommerce, the average SDE multiple is between 2.0x - 4.0x.
To value your ecommerce business, a valuation expert would use multiple used for other similar ecommerce businesses that have recently sold and apply them to your SDE to get a value.
For example, if your SDE is $300,000 and you receive an SDE multiple of 2.5x, then the business would have an implied value of $750,000 ($300,000 times 2.5x). For ecommerce, the average SDE multiple is between 2.0x - 4.0x.