WHAT IS SDE — AND WHY IT MATTERS MORE THAN REVENUE WHEN SELLING YOUR BOUTIQUE:
If you’ve ever thought about selling your business — whether it’s e-commerce, a brick-and-mortar shop, or both — you’ve probably wondered how much your business is really worth.
Most business owners naturally think “My sales are strong, so my business must be valuable.”
But here’s the truth: when it comes to selling your business, revenue (your total sales) isn’t what buyers focus on. The real number that determines your value is called SDE — Seller’s Discretionary Earnings.
Let’s talk about what that means, why it’s so important, and how it tells a much more powerful story than revenue ever could.
WHAT IS SDE?
Seller’s Discretionary Earnings (SDE) represents the total financial benefit you, as the owner, receive from your business each year.
Think of it as your true profit — the amount of money your business puts in your pocket once all the operating expenses are paid and personal or one-time items are added back.
So, if your business shows a net profit of $100,000 but you also pay yourself $75,000, run $10,000 in personal vehicle expenses through the company, and spend $5,000 on a one-time legal fee — your SDE would actually be $190,000.
WHY SDE MATTERS MORE THAN REVENUE:
A business with $1 million in annual sales might look impressive, but if it’s only breaking even, it won’t excite a buyer.
On the other hand, a business with $400,000 in sales but $120,000 in SDE could be worth much more.
That’s because buyers aren’t purchasing your sales — they’re purchasing your profit and opportunity.
Here’s why SDE is so critical in a business sale:
1. It shows what a new owner can actually take home. Buyers want to know how much income they can expect if they run your boutique the same way you do.
2. It gives a true picture of performance. Revenue doesn’t reveal how well your business is managed — but SDE shows your efficiency, pricing strength, and spending control.
3. It drives your business valuation. Business are valued at a multiple of SDE, not with a revenue multiple.
4. It helps you make smarter decisions before listing. Knowing your SDE helps you identify unnecessary expenses or personal items that could be added back to strengthen your financials before selling.
HOW BUSINESS OWNERS CAN INCREASE SDE:
If selling your boutique is on your radar in the next year or two, you can take small steps now to maximize your value:
● Streamline expenses: Cut unnecessary subscriptions, vendor costs, or marketing that doesn’t perform.
● Pay yourself consistently: Even if you pull money from owner draws, document it clearly.
● Separate personal and business expenses: The cleaner your financials, the easier it is for buyers to understand your true profit.
● Highlight efficiencies: Show buyers how your systems (like CommentSold, Shopify automations, or trained staff) keep operations smooth.
THE BOTTOM LINE:
Revenue shows size. SDE shows success.
When it comes to selling your business, what matters most isn’t how much money flows in — it’s how much flows to you as the owner. Buyers want a business that’s profitable, sustainable, and provides strong returns. That’s why SDE is the single most important number in a business sale.