Decoding the acronyms. When you sell, we don’t use the number at the bottom of your tax return. We “recast” your financials to show the true economic engine of the business.
1. EBITDA (Earnings Before Interest, Taxes, Depreciation, Amortization)
- Who uses it: Private Equity and buyers of larger companies (>$5M revenue).
- What it is: A measure of pure operating performance, removing financing and accounting decisions.
2. SDE (Seller’s Discretionary Earnings)
- Who uses it: Main Street and Lower Mid-Market buyers (<$5M revenue).
- What it is: EBITDA + Owner Compensation.
- Why add it back? Because the new owner will step into your shoes. They are buying your profit plus your salary plus your perks.
The “Lie” of Tax Returns
Your accountant’s job is to lower your income. Our job is to prove that income still exists.
- The “company car” you drive? That’s profit.
- The “business trip” to Hawaii? That’s profit.
- The one-time legal fee for a lawsuit? That’s a one-time expense, added back to profit.
Never judge your business’s value by what you tell the IRS. Decoding the acronyms. Judge it by the cash flow it actually generates for you.