Seller’s Discretionary Earnings (SDE)

These earnings are pre tax and pre-interest profits that are used for the owner’s benefit.  In other words, they are not inherent in actually running the business or a non-recurring income or expense.  It is the best measure of the earning power of a business. It can come in a number of forms, such as a bonus for employees, the owner’s vehicle’s expenses, income earned from consulting, etc.