Earnings quality

SDE vs. EBITDA when buying a small business: which number should you use?

Published August 31, 2026 · Reviewed by The Diligence Standard Team · Updated September 11, 2026

SDE and EBITDA answer different questions. The right bridge depends on buyer size, replacement management and how much owner labor is embedded in the business.

This guide is organized around the evidence a buyer or seller should be able to reconcile before relying on a transaction claim.