---
title: "SDE vs. EBITDA: The Math That Decides Your Exit"
description: Lorem Ipsum is simply dummy text
---

[Blog | Coaching Strategies](https://bluecollarcoaches.com/blog)

# [SDE vs. EBITDA: The Math That Decides Your Exit](https://bluecollarcoaches.com/blog/lorem-ipsum-is-simply-dummy-text-3)

 Written by [Hank Cassi](https://bluecollarcoaches.com/blog/author/hank-cassi) | Sep 10, 2026, 1:18:10 PM

SDE or EBITDA? The difference decides who buys your HVAC, plumbing, or electrical company and what they'll pay. A plain-English breakdown with a worked example.

Seller's discretionary earnings (SDE) measures the total cash benefit to one owner-operator. It's used to value smaller businesses that a buyer will run personally. EBITDA measures profit after paying a market-rate manager to replace the owner. It's used by private equity and larger buyers. Moving from an SDE business to an EBITDA business usually means a different kind of buyer and a higher multiple.

Two owners. Same revenue. Same trade. Same town.

One sells for a little under three times earnings. The other sells for five or six.

The difference usually isn't hustle. It's which number the buyer used.

### The two numbers, in plain English

**SDE** answers this: *if I buy this business and run it myself, how much cash do I take home?*

It starts with profit and adds back the owner's salary, perks, interest, depreciation, and one-time costs.

**EBITDA** answers a different question: *if I buy this business and hire someone to run it, how much profit is left?*

It starts with the same profit, but it pays a real manager a real salary. The owner's job becomes an expense.

### A worked example

These numbers are made up to show the math. Plug in your own.

| Line | Amount |
| --- | --- |
| Net profit on the tax return | $250,000 |
| Owner's salary | $180,000 |
| Personal expenses run through the business | $30,000 |
| Depreciation and amortization | $40,000 |
| Interest | $20,000 |
| One-time legal bill | $15,000 |
| **SDE** | **$535,000** |
| Minus a market-rate general manager | ($120,000) |
| **Adjusted EBITDA** | **$415,000** |

At the [BizBuySell median HVAC multiple](https://www.bizbuysell.com/learning-center/industry-valuation-multiples/) of 2.83 times SDE, that's about $1.5 million.

Now make it a business a professional buyer wants. Say it qualifies for five times adjusted EBITDA. That's about $2.1 million.

Same company. More than $550,000 apart. And the second buyer pays for a business you don't have to run.

### What moves you from SDE to EBITDA

You don't get to pick which number a buyer uses. The business picks it for you.

1. **A real manager in place.** Not "my guy could probably do it." A person already doing it.
2. **Enough profit to matter.** Professional buyers usually look for larger earnings before they get interested.
3. **Numbers that hold up.** Monthly financials, documented add-backs, and job costing.
4. **Revenue that repeats.** Maintenance agreements and commercial contracts.

### The trap

Some owners hear "EBITDA multiples are higher" and start quoting their SDE times six.

That's the fastest way to lose a buyer's trust. Know which number you're actually running.

### FAQ

**What is the difference between SDE and EBITDA?** SDE includes the owner's salary and perks as part of earnings. EBITDA subtracts a market-rate salary for a manager to replace the owner. SDE values owner-operated businesses; EBITDA values businesses that run without the owner.

**Which do buyers use to value an HVAC or plumbing company?** Individual buyers who'll run the business usually use SDE. Private equity firms and strategic buyers usually use adjusted EBITDA, especially for companies with a management team in place.

**Why are EBITDA multiples higher than SDE multiples?** EBITDA multiples apply to a smaller, more conservative earnings number, and they apply to businesses that don't depend on the owner. Buyers pay more for lower risk.

**Which number is your company running on?** Take the [Exit Readiness Scorecard](https://bluecollarcoaches.com/exit-scorecard). Or [book a discovery call](https://bluecollarcoaches.com/book-a-call) and we'll run your numbers both ways.

 

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