What Are Seller’s Discretionary Earnings?

Accountants and lawyers often think of earnings in terms of “net profit” or “net after-tax income.” But, for closely held businesses, do those measurements tell the whole story? Business valuators and business brokers tend to disregard the historical income figures in favor of “Seller’s Discretionary Earnings” (SDE) generated by the business. There are different versions of SDE, but all have the same goal: Determining the amount of actual benefit that is provided to the business owner. This measurement is one that also has an impact upon the value of a company. Contact a Certified or Accredited Valuation Analyst to learn more about this important benefit measurement.

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