Valuation Terms

SDE

Seller’s Discretionary Earnings. This is often used for smaller businesses and estimates the cash flow available to one owner-operator. Why it matters: SDE helps owner-operators understand how much cash the business can support, but it may not be the metric institutional buyers use for larger companies.

Related terms

Cash Flow

The actual cash moving in and out of the business. Why it matters: A profitable business can still run short on cash, so buyers study cash flow to see whether the company can pay bills, fund growth, and support debt.

Seller

The current business owner who wants to sell the business. Why it matters: The seller is not just handing over ownership; they are also proving the business, answering diligence requests, negotiating risk allocation, and often helping with transition.

More from Valuation Terms

Add-Backs Adjusted EBITDA CapEx Cash Flow EBITDA Enterprise Value Equity Value Free Cash Flow Gross Margin Gross Profit Multiple Net Income

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