Seller's Discretionary Earnings (SDE) Adjustment Worksheet

Seller’s Discretionary Earnings (SDE) Adjustment Worksheet

Work through a seller’s claimed earnings step by step. Enter the reported figures, document your adjustments, and see the normalized SDE and indicated value range.

This is an educational worksheet, not a professional valuation. It is designed to help you organize your analysis of a business listing. Always verify financials with tax returns and bank statements, and consult a qualified professional before making an offer.

Reported Earnings

Asking Price

The listed sale price of the business.

Pretax Business Earnings (from tax return)

Net income or pretax profit from the most relevant tax return. Use the tax-return figure, not the seller’s internal P&L.

Broker’s Claimed SDE (if provided)

Optional. Enter the SDE the broker or seller is presenting so you can compare it with your own calculation.

Add-Backs (Increase SDE)

Add back owner compensation, benefits, interest, depreciation, and verified discretionary expenses. Enter the seller’s claimed amount and the amount you accept after verification.

Description Claimed Accepted

Normalization Deductions (Decrease SDE)

Subtract costs the business should be incurring but is not, and remove nonrecurring income. These are expenses a new owner would face that the historical financials do not reflect.

Description Seller Shows Your Estimate

Valuation Multiple

Enter the SDE multiple range you believe is appropriate based on comparable transactions, industry norms, and the risk factors of this specific business.

Low Multiple

High Multiple

Your Normalized SDE and Indicated Value

Pretax earnings (baseline)—

Total accepted add-backs—

Total normalization deductions—

Normalized SDE—

Broker’s claimed SDE—

Your SDE vs. broker’s claim—

Indicated value (low)—

Indicated value (midpoint)—

Indicated value (high)—

Asking price—

Asking price as multiple of your SDE—

Enter your numbers above to see results.

This worksheet produces an educational estimate based on the figures you enter. It is not a professional business valuation. Always verify financials with original documents and consult qualified professionals before making acquisition decisions.

Next Steps

Use these tools to continue your analysis.

Run This in the Business Buyer’s Calculator Due Diligence Checklist Read the Valuation Guide Business Buyer’s Guide

Some links may be affiliate links. We may earn a commission at no extra cost to you, and we only point to tools and services we genuinely believe in.