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SDE (Seller's Discretionary Earnings)

By Jason Taken, business broker · HedgeStone Business Advisors · Updated 2026-09-04 · 2 min read

SDE, or seller's discretionary earnings, is the total annual financial benefit a laundromat produces for one full-time working owner: net profit plus that owner's compensation, plus non-cash charges, plus documented personal and non-recurring expenses run through the business.

Why SDE Matters in a Laundromat Sale

SDE is the number the price is built on. For an owner-operated store, a buyer is purchasing both a job and a return, so the earnings measure has to include what the owner takes out. Nearly every laundromat priced below the lower-middle market is quoted as a multiple of SDE, and the median earnings multiple across 855 laundromat sales reported to BizBuySell for 2021-2025 was 3.50x (Source: BizBuySell, 2021-2025).

Example

A store reports $44,000 of net income. Add back the owner's $46,000 of compensation and payroll taxes, $26,000 of depreciation, $9,000 of interest, and $7,000 of documented personal vehicle expense. SDE is $132,000. At 4.0x, that is a $528,000 indicated value before any deduction for near-term equipment replacement.

The Common Mistake

SDE assumes one working owner. If a store needs two people and a buyer will pay for the second, that cost stays in the expenses. Adding back both owners' compensation and then applying an SDE multiple overstates the business.

What to Check

  • Start from the filed federal return, not the bookkeeping P&L — the return is what a lender underwrites.
  • Require a source document for every add-back before you count it.
  • Confirm the store runs on one working owner; if it takes two, the second person's cost stays in expenses.

Where This Comes Up

  • EBITDA — EBITDA is earnings before interest
  • Add-Back — An add-back is an expense removed from reported earnings during valuation because a new owner will not incur it: owner compensation
  • Owner Benefit — Owner benefit is the total value an owner extracts from a business in a year
  • Multiple (Valuation Multiple) — A valuation multiple is the factor applied to normalized earnings to produce a business value

See the full laundromat glossary for all 78 terms.

The Next Step

Sources

This page is general information about laundromat transactions, not legal, tax, or investment advice, and not a guarantee of sale price, timing, or financing approval. Verify current rules with your own CPA, attorney, lender, and the relevant state or municipal agency before acting.