SDE — Seller's Discretionary Earnings

Net profit plus your salary, benefits, and personal or one-time expenses run through the business. This is the standard figure for owner-operated businesses, typically under about $5M in revenue.

EBITDA — Earnings Before Interest, Taxes, Depreciation & Amortization

Operating profit before those items, without adding back an owner's salary. This is the standard figure for larger businesses that already pay a market-rate manager or ownership team to run them.

Simple rule of thumb: if you (or a family member) work in the business without a market-rate salary, you almost certainly want SDE. If the business runs under professional management and would keep running if you left tomorrow, use EBITDA.