Sellers Discretionary Earnings (or SDE) is a figure often used in valuations and acquisitions of small businesses. SDE often goes by other names:

DCF: Discretionary Cash Flow
SDI: Seller’s Discretionary Income
SDCF: Seller’s Discretionary Cash Flow
ODI: Owner’s Discretionary Income
ODCF: Owner’s Discretionary Cash Flow

But what exactly is it and how do you calculate it? Why is it important?

In this video, Mark Daoust answers the most common questions that come up when it comes to understanding and measuring Seller’s Discretionary Earnings (SDE).

SDE is potentially the most misunderstood metric in ecommerce. It's more complicated than just cash flow or profits or income, and while it may at first be a confusing concept for many business owners, accurately calculating your SDE is critical when it comes to valuing your online business.

Watch this video to learn:
The definition of SDE and what it entails,
Tactics to find the numbers behind your SDE
Examples of how accurately calculating SDE can affect your business in the long term.

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0:31 Important metrics for you to understand. Seller & Buyer
0:53 What exactly are seller discretionary earnings
1:01 Technical Definition of SDE
1:13 Breaking down SDE
1:39 True onetime expenses
1:50 The goal of the discretionary earnings calculation