SDE vs. EBITDA for Laundromats: Which Number Prices Your Store
SDE prices an owner-operated laundromat; EBITDA prices a business that already pays market-rate management. SDE adds back one working owner's compensation, EBITDA leaves it as an expense. The same store therefore shows two correct earnings figures, and applying the wrong multiple to the wrong base is the most common valuation error in this industry.
Key takeaways
- SDE for a single owner-operated store. The buyer is acquiring a job and a return together.
- EBITDA once real management is paid for. Commonly three or more stores, or one large store with a full-time manager.
- The two differ by roughly the owner's labor value — often $35,000 to $55,000 a year at a typical store.
- Never cross the streams. The 3.50x median from 855 reported sales is an SDE multiple (Source: BizBuySell, 2021-2025).
- Lenders think closer to EBITDA even on one store, because they assume someone has to be paid to run it.
The Definitions
SDE — seller's discretionary earnings. The total annual financial benefit available to one full-time working owner. Start from net income on the filed return, then add back:
- one working owner's compensation and payroll taxes
- owner health insurance run through the business
- depreciation and amortization
- interest expense
- documented personal expenses run through the business
- genuinely non-recurring items
EBITDA — earnings before interest, taxes, depreciation, and amortization. Operating profit after paying market-rate management. Start from the same net income, then add back:
- depreciation and amortization
- interest expense
- taxes at the entity level
But not the owner's compensation, which stays as an expense — adjusted to market if the owner has been paying themselves above or below what a manager would cost.
The Same Store, Two Numbers
| Line | Amount |
|---|---|
| Gross revenue | $312,000 |
| Operating expenses before owner compensation | ($191,000) |
| Owner compensation as paid | ($42,000) |
| Depreciation | ($26,000) |
| Interest | ($9,000) |
| Net income on the return | $44,000 |
| SDE calculation | |
| Net income | $44,000 |
| Add owner compensation and payroll taxes | +$46,000 |
| Add depreciation | +$26,000 |
| Add interest | +$9,000 |
| Add documented personal expenses | +$7,000 |
| SDE | $132,000 |
| EBITDA calculation | |
| Net income | $44,000 |
| Add depreciation | +$26,000 |
| Add interest | +$9,000 |
| Add documented personal expenses | +$7,000 |
| Adjust owner compensation to market ($42,000 paid vs. $48,000 market) | ($6,000) |
| EBITDA | $80,000 |
Illustrative. Both figures describe the same store honestly. The $52,000 gap is what one working owner's labor is worth.
Why the Multiples Are Not Interchangeable
The 3.50x median from 855 reported laundromat sales is an SDE multiple, because the overwhelming majority of stores in that dataset are single owner-operated businesses.
Apply it to the EBITDA figure above and you get $280,000. Apply it correctly to SDE and you get $462,000. Same store, a $182,000 difference, produced entirely by a definitional error.
The reverse error is equally common in the other direction. A buyer accustomed to lower-middle-market EBITDA multiples who applies one to a small store's SDE overpays substantially.
The rule: always ask which earnings base a quoted multiple was built on, before comparing any two deals.
Which One Applies to Your Store
| Situation | Measure | Why |
|---|---|---|
| One store, owner works in it | SDE | The buyer's labor and return are the same thing |
| One store, unattended, owner does collections and oversight | SDE | Still owner labor, just less of it |
| One large store with a full-time paid manager | EBITDA is defensible | Management is already a real expense |
| Two stores, owner splits time between them | SDE, with care | Only one owner's compensation is added back |
| Three or more stores with a manager | EBITDA | The business runs on paid people |
| A roll-up or platform acquisition | EBITDA | The buyer is acquiring cash flow, not employment |
Among CLA survey respondents, 40% owned a single store and 34% owned two, with 13% owning five or more (Source: CLA 2024 Laundry Industry Survey). That distribution is why SDE is the working default in this industry.
The One-Owner Rule
SDE is defined on the basis of a single working owner. Two traps follow.
Two owners. If a husband-and-wife pair both work in the store and a buyer will have to pay someone to replace the second person, only one compensation figure is an add-back. The other stays in the expenses. Sellers who add back both and then apply an SDE multiple are overstating the business by the full amount times the multiple.
Unpaid family labor. A relative working 15 hours a week for nothing is a real cost the buyer will incur. It should appear as an expense at market rate, not be quietly absorbed into a higher SDE.
What Lenders Actually Compute
Neither measure exactly. A lender computes cash flow available for debt service after a market-rate salary for whoever will run the store, and after striking any add-back without a source document.
That is closer to EBITDA in spirit, even on a single store, and it is why a seller's SDE figure and a lender's coverage calculation can look very different for the same business.
The practical implication for a buyer: test debt service coverage using SDE less the salary you would have to pay if you did not work there. If coverage only works when your own labor is free, you have bought a job, and you should price it as one.
What Happens at the Transition Point
The move from SDE to EBITDA is where multi-store operators most often misprice their own business, in both directions.
Selling a group and quoting summed SDE. Three stores each producing $95,000 of SDE do not produce $285,000 of transferable earnings if the owner is personally covering management across all three. A buyer acquiring the group will hire a manager, and that cost is real. Quoting summed SDE and applying an SDE multiple overstates the business substantially.
Selling a group and quoting EBITDA without claiming the scale premium. The opposite error. A group with genuine management, standardized systems, consolidated purchasing, and a service relationship that scales is a materially lower-risk asset than three separate owner-operated stores. It should command a higher multiple on the smaller earnings base, and sellers who present EBITDA without arguing for that premium leave value behind.
Buying add-ons and modeling them on the platform's multiple. An add-on store bought into an existing platform does not deserve the platform's multiple. It deserves the single-store multiple, priced on the four gates that decide any individual location — lease, provable revenue, equipment remaining life, and utility exposure — with the synergy captured by the buyer rather than paid to the seller.
The clean way through all three: state the earnings base explicitly, state the management assumption explicitly, and let the multiple argument happen on top of numbers both sides agree on.
Summary
SDE for owner-operated stores, EBITDA once management is genuinely paid for. The difference between them is one owner's labor, which at a typical laundromat is $35,000 to $55,000 a year. The 3.50x median from 855 reported sales is an SDE multiple. Ask which base any quoted multiple uses before you compare it to anything, and test your coverage with a replacement salary deducted.
The practical test, for either side of a transaction, is a single question: if the owner walked away tomorrow, what would it cost to keep this store running exactly as it runs today? Answer it honestly in dollars, and you have simultaneously found the gap between SDE and EBITDA, the number a lender will use for coverage, and the figure a semi-absentee buyer should be underwriting. Everything else in this debate is terminology.
The Next Step
Frequently Asked Questions
Should a single laundromat be valued on SDE or EBITDA?
SDE, in almost every case. A single owner-operated store is bought by someone acquiring a job and a return together, so the earnings measure has to include what the owner takes out. EBITDA becomes the right measure once the business carries market-rate management and the buyer is acquiring cash flow rather than employment.
Why does the same store show two different earnings numbers?
Because SDE adds back one working owner's compensation and EBITDA leaves a market-rate management cost in the expenses. On a store where the owner's labor is worth $45,000, SDE and EBITDA differ by roughly that amount — and both are correct answers to different questions.
What happens if I mix them up?
You get a number that is wrong by a large margin in a predictable direction. Applying a 3.50x SDE multiple to an EBITDA figure understates the business; applying an EBITDA multiple to SDE overstates it. This is the most common cause of a valuation argument in which both sides are doing arithmetic correctly.
At what size does a laundromat switch to EBITDA?
There is no fixed threshold. The switch happens when the business genuinely carries paid management rather than the owner's own labor — commonly around three or more stores, or one very large store with a full-time manager. What matters is whether the earnings survive the owner walking away, not the store count.
Which measure do lenders use?
Lenders underwrite cash flow available for debt service after a market-rate salary for whoever will run the business, which is closer to EBITDA in spirit even on a single store. That is why a seller's SDE figure and a lender's coverage calculation can differ sharply, and why coverage should be tested with the owner's replacement salary deducted.
Sources
- BizBuySell, Laundromat and Coin Laundry Valuation Benchmarks, 2021-2025 closed sales — https://www.bizbuysell.com/learning-center/valuation-benchmarks/laundromats-coin-laundry/
- Coin Laundry Association, 2024 Laundry Industry Survey — https://member.laundryassociation.org/hubfs/IndustrySurvey24.pdf
- U.S. Small Business Administration, 7(a) Loans — https://www.sba.gov/loans/7a-loans/
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.