The first question isn’t “What multiple can I get?”

It’s “What earnings number is that multiple being applied to?”

When preparing to sell a business, owners often compare valuation multiples without checking whether those multiples apply to EBITDA or Seller’s Discretionary Earnings (SDE).

That’s where the conversation can go off track.

SDE generally reflects the economic benefit available to one working owner. Normalized EBITDA evaluates operating earnings after accounting for an appropriate operating structure—including the management costs the business requires.

The distinction matters when discussing:

• Owner compensation and replacement management.

• Legitimate, documented add-backs.

• Comparable business sales.

• Buyer expectations and financial due diligence.

• Asking price versus defensible transaction value.

A higher earnings figure doesn’t automatically mean a higher business valuation. And a higher multiple doesn’t mean much without understanding the underlying earnings definition.

In this GillAgency video, we explain EBITDA vs. SDE, walk through the owner-compensation difference, and show why matching the metric to the business and buyer matters.

Before negotiating your multiple, understand your earnings.

Watch the video, and share your perspective: Where do you see the most confusion—add-backs, owner compensation, or valuation multiples?