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 valuation-arr-multiples/">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.