E27 The Purpose of Seller’s Discretionary Earnings with the Advisory Team

Every business owner must have a firm grasp of their company’s earnings—be it monthly, quarterly, or annual. There are plenty of metrics you can use to determine your profits and losses, and among them is what we call Seller’s Discretionary Earnings or SDE. What is Seller’s Discretionary Earnings? How do you compute your company’s SDE, and how reliable is it as a measurement of earnings?

 

Matt and Jean-Luc join me today to break down Seller’s Discretionary Earnings and their purpose in business valuations. They share similar metrics accountants and advisors use in valuations and what makes SDE unique. They explain the best time to use SDE and the key differences between taxes and valuations. Matt and Jean-Luc also describe an experience with a client who put jewelry as part of business expenses.

 

“Seller’s Discretionary Earnings seeks to add back all owner’s benefits and compensations.” – Matt Smith

 

This week on the Expensive Advice Podcast:

 

Why SDE is more important the smaller a company is

Normalized Earnings and its importance to investors

The difference between Normalization and SDE

The right time to use SDE over other financial metrics

What EBITDA is and its importance

Our advisory team’s experience valuing client finances

The difference between taxes and valuations

 

Connect with Matt Smith and Jean-Luc Johnstone:

 

Matt Smith on LinkedIn

Jean-Luc Johnstone on LinkedIn

 

Turning Boring Money into FUN Money

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