SDE vs EBITDA
Which earnings figure applies to your business, why the multiples attached to them are not interchangeable, and the €400,000 mistake owners make when they mix the two.
Two figures, calculated from the same accounts, that can differ by a hundred thousand euros. The mistake is never in the arithmetic. It is in applying a multiple built for one to the other.
What each one includes
| SDE | EBITDA | |
|---|---|---|
| Owner salary | Added back in full | Deducted at market rate |
| Owner benefits | Added back | Deducted if the role needs them |
| One-off costs | Added back | Added back |
| Non-operating costs | Added back | Added back |
| Second working owner | Deducted at market rate | Deducted at market rate |
| Depreciation | Added back | Added back |
| Answers | What one owner-operator takes home | What the business earns independently |
The last row is the whole distinction. SDE describes a job plus a business. EBITDA describes a business.
The same company, both ways
- Operating profit
- €185,000
- as reported
- SDE
- €312,000
- + owner €95k, + car €14k, + one-offs €18k
- EBITDA
- €247,000
- same add-backs, then − €65k market-rate manager
The €65,000 gap is what it would cost to hire someone to do what the owner does. SDE assumes the buyer does that work themselves. EBITDA assumes they pay someone.
Why the multiples are different, and not by a little
| Typical multiple | Implied price on the figures above | |
|---|---|---|
| SDE | 2–3.5× | €624k – €1.09M |
| EBITDA | 4–6× | €988k – €1.48M |
SDE multiples are lower precisely because SDE is a larger number containing a salary. They are two halves of the same equation and neither is generous.
Which one applies to you
- One owner working full time in the business, under roughly €1M turnover → SDE
- The buyer will step into the owner's job personally → SDE
- A management layer runs day-to-day operations → EBITDA
- Above roughly €1M of turnover, or €500k of earnings → EBITDA
- Private equity or a strategic buyer is in the process → EBITDA, without exception
If you are between the two, calculate both. The gap tells you what your own involvement is worth in the sale, which is useful information regardless of which figure you present.
The second working owner problem
Two founders both working full time, one salary between them. SDE adds back one owner's compensation, not two — the second is a genuine operating cost, because the buyer will have to replace that person.
Owners routinely add back both and inflate SDE by an entire salary. It is the first thing a buyer's advisor recalculates, and it costs credibility on everything else in the file.
What buyers do with the number
Neither figure is accepted as presented. A buyer will recalculate it from your accounts, and their version will be lower — that is not adversarial, it is the job. What buyers look for covers what they check first, and how EBITDA affects your valuation covers which add-backs survive.