SDE vs EBITDA: Which Applies to Your Website?

Two ways to define 'earnings'

Valuations multiply earnings by a number, but 'earnings' can mean different things. SDE (Seller's Discretionary Earnings) and EBITDA (Earnings Before Interest, Taxes, Depreciation, and Amortization) are the two most common definitions, and which one applies changes both the earnings figure and the multiple. Knowing which your site is priced on prevents comparing apples to oranges when you look at offers or comps.

What SDE is and when it applies

SDE is profit plus the owner's salary and discretionary add-backs — it reflects the total financial benefit to a single owner-operator. It's the standard for most small websites and online businesses, because the buyer typically steps into the owner's shoes and runs the site themselves. If you're selling a site you personally operate, you're almost certainly being valued on SDE.

What EBITDA is and when it applies

EBITDA strips out owner-specific and financing items to show operating profit, and it's used for larger businesses run by a team rather than a single owner — where there's a real management structure and the buyer isn't replacing one person's labor. Larger SaaS and established companies are more often valued on EBITDA, typically at different multiples than SDE-based small-site sales.

Why the distinction matters

The two aren't interchangeable: SDE includes the owner's compensation while EBITDA (for a properly-run larger business) already accounts for management as a cost, so the same business shows a higher SDE than EBITDA. Comparing an SDE multiple to an EBITDA multiple without adjusting will mislead you. For most website sellers the practical takeaway is simple — you're on SDE, so build a clean SDE figure and benchmark against other SDE-based sales.

What each measure is for

Seller's discretionary earnings adds the owner's compensation and benefits back into profit, on the logic that a small business run by its owner has no separate management cost. EBITDA leaves a market-rate management cost in place and strips out interest, tax, depreciation and amortisation instead. SDE describes what an owner-operator would take home; EBITDA describes what the business earns independently of who runs it.

Which one applies to your site

Below roughly $1 million in value, small online businesses are almost always valued on SDE, because the buyer will run the site themselves and the owner's labour is genuinely discretionary. Above that, buyers are more often acquiring something they will staff, so EBITDA becomes the relevant figure. Most website sales sit firmly in SDE territory, which is why multiples in this market are quoted against monthly profit including owner earnings.

Why the distinction changes the price

The two measures produce different numbers on the same business, and the multiples applied to them are different too. A site with $80,000 SDE where the owner works twenty hours a week might show $40,000 EBITDA once a market-rate operator is costed in. Quoting an SDE figure and then an EBITDA multiple, or the reverse, produces a valuation that is simply wrong, and it happens often enough to be worth checking explicitly.

Getting the adjustments right

Under SDE, add back owner salary and benefits, one-off costs, and expenses that will not transfer, and itemise every one. What must not be added back is any cost the buyer will still carry, which is where most disputes arise: contractor payments that continue, software the site actually needs, content spend required to hold rankings. Adding those back inflates the multiple's base and does not survive diligence.

How to present it to buyers

State plainly which measure you are quoting, show the bridge from accounting profit to it line by line, and note the hours the business requires. Buyers are comfortable with SDE and expect it at this size; what unsettles them is a profit figure whose construction is unexplained. A clear one-page bridge from bank reality to headline earnings does more for credibility than any amount of listing copy.