SDE or EBITDA Which do I use?

***New Video Alert!
Should you be looking at SDE or EBITDA?
When do we use each and what is the difference?
It’s important.
The new video is here: • SDE or EBITDA Which do...
Cheers
See you over on KZbin
David C Barnett
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[@mbb3957]

Thanks for the video. Would be curious to know what podcasts you like in this space. There’s 4 or 5 I listen to regularly.

[@DavidCBarnett]

Acquiring Minds, Buying Online Businesses, Owned and Operated, Winning on Main St., Catapult your Business, Wisdom.mba, Cultivating Success, Think like an owner, Getting the deal done, Richer soul, Profit answer man, The how of business, those are my regulars. Keep in mind, I walk about 20km /day

[@mbb3957]

@@DavidCBarnett Thank you. I'm listen to three of those. Will give a shot to the others. So much good content out there for aspiring searchers.

[@azulmarineintl.5346]

David, what about '' QoE's '' .. this is very important that came up from one of guys you recommended to follow .. before getting deep into DD. thanks Alan

[@DavidCBarnett]

A Quality of Earnings report analyzes the cash flow of the business. Usually done by a professional due-diligence provider. Their report would either give you an opinion of SDE or EBITDA and should have this definition correct. *But make sure your read the fine print to be sure.

[@fernandom77]

Great video David to know the concepts of both numbers. Something is not too clear for me. EBITDA is a number that already has the salaries and wages counted as expenses and SDE also has the number of that manager salary counted in. So it would end up being the same number isn't it?

[@daxdesai]

Mlllklklllllllll

[@DavidCBarnett]

No, you've got it wrong. EBITDA is what is left over after a manager is paid. SDE includes this salary. Watch the video again.

[@drizzleontops]

@@DavidCBarnett while i understand the difference, your chart is causing confusion because the yellow "total revenue" bar and height of both SDE and EBITDA sides are all equal. So one might easily assume they they are the same number, just comprised of different sized pieces of the pie. Perhaps this is a good question to help clarify for people: For any given business, would EBITDA typically be less than SDE (because manager-operating costs are seen as expense)?

[@babupotunak4854]

if you have shown with numbers would have been easily understood

[@DavidCBarnett]

Watch this video: kzbin.info/www/bejne/e2GsdnqqqK54Z9E Cheers

[@random_silicates]

Imagine a 10 location business that's just breaking even by EBITDA, but has a huge SDE because you're counting all the managers as "discretionary" and adding back their salaries.

[@DavidCBarnett]

SDE of ONE business includes ONE manager's salary. In the example you've given, it would be the regional manager, for example or person at the head of this chain of locations. You would only add back an individual location's manager salary if you were evaluating the individual locations for a potential piecemeal acquisition. If you were looking at the 10 location chain as one bigger business, you just apply the adjustment to the top boss's salary.

[@catherinekyte7053]

David, My husband passed away and owns 25% of a small business that is worth 450 000 his partner only wants to give me 50,000 How do I evaluate the business? Thanks, Cathy

[@DavidCBarnett]

I recommend you visit with an attorney to understand all your rights and find any copies of any shareholder or partnership or operating agreements that may have buy/sell provisions. These may include a dispute resolution mechanism or valuation formula. If none of these exist then your options could be more costly and involve legal actions. Certainly not an enviable situation. Good luck.

[@danbuffington75]

No idea what SDE is because I gave up on after 2:30 in the video. All I learned up to that point is that people are confused about initials. It is repeatedly repeated in a repeating fashion.

[@DavidCBarnett]

I do explain what it is in the video. But I would suggest you spend more time on the channel if buying a business is something you want to do one day. Mixing these up is the leading cause of buyers overpaying for a business.