Seller's Discretionary Earnings vs EBITDA: Florida Guide

When Florida business owners start exploring a sale, they quickly encounter two valuation terms that seem interchangeable but aren't: Seller's Discretionary Earnings (SDE) and EBITDA. Use the wrong one in buyer conversations and you risk either overvaluing your business on paper or leaving real money on the table.

This guide breaks down both metrics, explains when each applies, and shows you how Florida buyers — from individual operators to private equity firms — use these numbers to set their offer price.

What Is Seller's Discretionary Earnings (SDE)?

SDE is the total financial benefit a single owner-operator derives from a business annually. It starts with net income and adds back the owner's salary and compensation, depreciation, amortization, interest, taxes, and any personal or one-time expenses run through the business.

The formula:

SDE = Net Income + Owner's Salary & Benefits + Depreciation & Amortization + Interest + Taxes + Non-Recurring Expenses + Personal Expenses

SDE assumes the buyer will be the person running the business day-to-day. That's why the owner's compensation is added back — the new owner earns their return through a combination of salary and profit. This metric is standard for small businesses in Florida: HVAC companies, landscaping operations, restaurants, professional service firms, and most Main Street businesses generating under $5–10 million in annual revenue.

If your business generated $400,000 in net profit, you paid yourself $150,000, and ran $30,000 in personal expenses through the company, your SDE would be $580,000. At a 3.0x multiple, that business is worth $1.74 million — a very different picture than quoting EBITDA without adding back your compensation.

What Is EBITDA?

EBITDA stands for Earnings Before Interest, Taxes, Depreciation, and Amortization. Unlike SDE, it does not add back the owner's salary. EBITDA assumes the business has — or will have — a professional management team in place. The buyer is acquiring a company with infrastructure, not simply buying a job.

EBITDA = Net Income + Interest + Taxes + Depreciation + Amortization

EBITDA is the preferred metric for companies generating $1–2 million or more in annual earnings. Private equity firms, family offices, and strategic acquirers all negotiate on EBITDA multiples. If your business runs without you — you function as owner rather than operator — EBITDA is typically the right lens, and it commands higher multiples than SDE.

A Florida manufacturing company with $1.5M in EBITDA and a strong management team might sell at 5.0–6.5x EBITDA, versus a similar-sized owner-operated business pricing at 3.5–4.5x SDE. The earnings base is different, the multiple is different, and the buyer pool is different.

SDE vs. EBITDA: Side-by-Side Comparison

Here's how the two metrics stack up across the factors that matter most to Florida sellers:

Factor	SDE	EBITDA
Owner's Salary Add-Back	Yes — full compensation added back	No — management costs remain in earnings
Typical Business Size	Under $2M annual earnings	$1M+ annual earnings
Buyer Type	Individual operators, owner-operators, SMB buyers	Private equity, family offices, strategic acquirers
Typical Florida Multiple Range	2.5x – 4.5x	4.0x – 7.5x+
When It's Used	Trades, food & beverage, local services, Main Street	Professional services, manufacturing, tech, healthcare
Management Dependency	High — buyer typically replaces owner	Low — professional team already in place

Which Metric Applies to Your Florida Business?

The easiest rule of thumb: if you personally work in your business and your compensation is meaningful relative to total earnings, start with SDE. If your business runs without you — you're more owner than operator — EBITDA is likely the right frame.

In practice, many Florida businesses sit in a gray zone. A $4M revenue HVAC company where the owner still handles the largest commercial contracts might be presented as SDE to a regional buyer and EBITDA to a private equity roll-up — depending on who's in the room. An experienced M&A advisor knows how to frame the same business for different buyer audiences without misrepresenting the numbers.

Industry also matters. Here are current 2025 Florida market benchmarks by sector:

• HVAC / Mechanical: SDE 3.0–4.5x | EBITDA 5.0–7.0x (PE roll-ups remain aggressive in Florida)
• Healthcare / Medical Practices: SDE 2.5–4.0x | EBITDA 5.0–8.0x
• Construction / Trades: SDE 2.5–3.5x | EBITDA 4.0–6.0x
• Professional Services (CPA, Law, IT): SDE 2.0–3.5x | EBITDA 4.5–6.5x
• Manufacturing: SDE 3.0–4.5x | EBITDA 5.0–7.5x
• Food & Beverage / Restaurants: SDE 1.5–3.0x | EBITDA 3.0–5.0x

For a full breakdown of your industry, visit our business valuation page or use the CBH Valuation Calculator for a preliminary estimate.

Common Add-Backs That Increase Your Earnings Number

Whether you're calculating SDE or EBITDA, add-backs are adjustments to reported earnings that normalize profits to reflect the true economic performance of the business. Buyers and their accountants will scrutinize every add-back — the goal is to build a defensible, well-documented case for each adjustment.

Common add-backs CBH sees with Florida sellers:

• Owner compensation above market rate: If you pay yourself $300K but a replacement manager would cost $120K, the $180K difference is a legitimate add-back under SDE normalization.
• Personal vehicle or travel expenses: Personal-use costs run through the P&L are added back in both SDE and EBITDA normalization.
• One-time legal or professional fees: Litigation costs, prior M&A advisory fees, or one-time consulting engagements that won't recur.
• Non-recurring rent adjustments: If you own the real estate and charge below-market rent to the operating company, the delta should be normalized to market rate.
• Depreciation on non-essential assets: Equipment owned personally and leased to the business, or fully depreciated assets still in active service.
• Family members on payroll: Compensation for family members not actively contributing at market rates.

A thorough add-back analysis can add $200,000–$500,000 to the earnings base of a typical Florida small business. At a 3.5x multiple, that's $700,000–$1.75 million in additional enterprise value. This is one of the highest-ROI activities a seller can complete before going to market. Learn more on our Sell Your Business in Florida page or browse our free seller resources.

Presenting Your Numbers to Buyers the Right Way

The way you present earnings matters as much as the numbers themselves. Buyers evaluate credibility. A clean, well-documented earnings recast — showing actuals, each add-back with supporting documentation, and the normalized figure — builds trust and reduces the risk that buyers will discount your number during due diligence.

CBH Business Group prepares a detailed financial recast for every client before we approach the market. We identify every legitimate add-back, support each one with documentation, and present the normalized earnings in a format that institutional buyers recognize and respect. This process typically takes 2–3 weeks and is included as part of our sell-side advisory engagement.

For sellers who want to understand their numbers before committing to a process, we offer a free preliminary valuation that walks through SDE, EBITDA, and the key value drivers specific to your industry and size.

Work With CBH Business Group to Maximize Your Florida Sale

CBH Business Group is a Florida-based M&A advisory firm headquartered in St. Cloud, FL. We specialize in helping small and mid-market business owners across Central Florida — and statewide — achieve maximum value when selling. We've represented sellers in HVAC, healthcare, construction, professional services, manufacturing, and more.

We know how Florida buyers think, what multiples the market is supporting right now, and how to position your business so the right buyers compete for it. Whether you're 12 months from a sale or just starting to explore your options, the time to understand SDE and EBITDA is now — before you're in the middle of a deal.

CBH Business Group | St. Cloud, FL | (407) 908-3845

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