SELLER'S DISCRETIONARY EARNINGS & EBITDA

SDE vs. EBITDA: What's the Difference in Business Valuation?

Seller's Discretionary Earnings (SDE) measures normalized earnings available to a working owner and generally adds back one owner's compensation and benefits. Normalized EBITDA measures operating earnings after reflecting the market cost of the management and labor required to run the business.

The distinction matters because SDE and EBITDA serve different buyer profiles and must be paired with valuation multiples derived from comparable earnings measures.

BVA explains how owner compensation, seller add-backs, and management replacement costs affect both earnings and business value.

Private Business Valuation Guide

What Is the Difference Between SDE and EBITDA?

Understanding Owner-Operator Earnings vs. Normalized Operating Earnings

THE CENTRAL VALUATION QUESTION

Will the buyer personally perform the owner's operating responsibilities, or will the business need to pay employees and managers to perform those functions?

OWNER-OPERATOR PERSPECTIVE

Seller's Discretionary Earnings (SDE)

SDE measures the normalized financial benefit available to an owner who actively operates the business. It generally includes one working owner's compensation and benefits, along with other supportable normalization adjustments.

TRANSFERABLE OPERATING EARNINGS

Normalized EBITDA

Normalized EBITDA measures operating earnings before interest, taxes, depreciation, and amortization, after reflecting the market cost of necessary management and labor. Actual owner compensation is evaluated against the cost of replacing the owner's operating responsibilities.

Why the distinction matters: SDE and normalized EBITDA reflect different buyer economics and management assumptions. Each must be paired with valuation multiples derived from comparable earnings measures. Using an SDE multiple with normalized EBITDA, or an EBITDA multiple with SDE, can materially distort the resulting indication of business value.

SDE vs. EBITDA: Side-by-Side Comparison

Understanding the Earnings Measures Used in Private Business Valuation

Seller's Discretionary Earnings (SDE) and normalized EBITDA can describe the financial performance of the same company from different economic perspectives. The distinction depends principally on owner involvement, required management compensation, and the earnings definitions used in comparable transactions.

The comparison below explains how Business Valuation Advisors evaluates the appropriate earnings measure when analyzing a privately held business.

BVA NORMALIZED EARNINGS COMPARISON

 Understanding the Differences Between SDE and EBITDA 

  
Comparison Factor Seller's Discretionary Earnings (SDE) Normalized EBITDA
Primary Economic Perspective Financial benefit available to a working owner who performs the relevant operating responsibilities. Operating earnings after necessary management and labor costs are reflected.
Typical Buyer Perspective Often used for smaller, owner-operated businesses where the purchaser expects to work in the business. Commonly used when a buyer evaluates operating profitability with compensated management.
Owner Compensation Generally adds back one working owner's compensation and benefits that were previously expensed. Replaces actual owner compensation with a supportable market cost for necessary operating responsibilities.
Required Management Assumes the owner-operator performs the relevant role; all other necessary employees and operating costs remain. Includes the cost of managers and employees needed to maintain the business independently of the departing owner.
Seller Add-Backs May include documented discretionary, nonrecurring, and nonoperating expenses in addition to the qualifying working-owner compensation. May include supportable normalization adjustments, but necessary ongoing business expenses must remain.
Cash Flow Implications Measures owner-operator earnings benefits before separate consideration of cash taxes, capital expenditures, debt service, and other cash requirements. Measures operating earnings before interest, taxes, depreciation, and amortization, not free cash flow.
Appropriate Valuation Multiples Use comparable SDE-based transaction multiples, with consistent definitions of earnings and transaction value. Use comparable EBITDA-based multiples with consistent enterprise-value definitions and transaction assumptions.

On smaller screens, scroll horizontally to view all three comparison columns. Actual adjustments depend on the business, owners' responsibilities, source financial statements, and definitions used in the relevant transaction database.

BVA VALUATION INSIGHT

Higher Earnings Do Not Automatically Mean Higher Business Value

SDE is commonly greater than normalized EBITDA for an owner-operated company because it generally includes one working owner's compensation. However, the two metrics are associated with different buyer economics and market-multiple conventions.

Applying an EBITDA multiple to SDE, or an SDE multiple to normalized EBITDA, can materially distort the resulting value indication. The analyst must also evaluate the transaction-value basis, cash and debt treatment, working capital expectations, and comparability of the underlying market evidence.

THE CENTRAL QUESTION FOR BUYERS

 Will the Buyer Operate the Business, or Will the Business Need Paid Management? 

The answer affects the appropriate earnings measure, the management compensation adjustment, and the market evidence used to support the valuation. A professional valuation must reflect the relevant economic assumptions rather than mechanically apply an industry multiple.

From Reported Earnings to SDE and Normalized EBITDA

A Worked Business Valuation Earnings Reconciliation

The same privately held business can produce different normalized earnings measures depending on whether its future owner performs the existing owner's operating responsibilities or pays a qualified manager to perform those functions.

The following fictional example illustrates how Business Valuation Advisors reconciles reported EBITDA to Seller's Discretionary Earnings and normalized EBITDA using actual owner compensation and a hypothetical market-based replacement cost.

REPORTED EBITDA

$290,000

After actual owner compensation

ACTUAL OWNER COMPENSATION

$250,000

Salary and benefits previously expensed

MARKET REPLACEMENT COST

$150,000

Fully burdened management compensation

BVA FINANCIAL EXHIBIT 01

 Reported EBITDA to SDE and Normalized EBITDA 

Assume one working owner receives $250,000 in annual compensation and benefits, all previously deducted in reported EBITDA. No other seller adjustments are assumed.

Earnings Reconciliation Annual Amount
Reported EBITDA, after owner compensation $290,000
Add back one owner's expensed compensation and benefits +$250,000
RECAST SELLER'S DISCRETIONARY EARNINGS $540,000
Less fully burdened market replacement compensation ($150,000)
NORMALIZED EBITDA $390,000

STEP 01 / RECAST SDE

$290,000 + $250,000

= $540,000

Remove one working owner's expensed compensation from the owner-operator earnings measure.

STEP 02 / NORMALIZED EBITDA

$540,000 − $150,000

= $390,000

Reflect the assumed market compensation needed to replace the owner's operating role.

The $150,000 replacement compensation assumption includes applicable salary, payroll-related costs, and benefits. An actual appraisal would evaluate the owner's duties, skills, hours, responsibilities, and market compensation evidence before selecting an adjustment.

ILLUSTRATIVE EARNINGS COMPARISON

One Business — Three Earnings Figures

Reported EBITDA $290,000

Recast SDE $540,000

Normalized EBITDA $390,000

Bars are scaled to the largest illustrated earnings measure, $540,000 in recast SDE. The different amounts reflect different compensation assumptions, not separate companies or independent enterprise valuations.

BVA INDEPENDENT EARNINGS ANALYSIS

The Net EBITDA Normalization Adjustment Is +$100,000

$250,000 − $150,000 = $100,000

The company's actual owner compensation exceeds the assumed market replacement cost by $100,000. Consequently, normalized EBITDA of $390,000 is $100,000 higher than the reported EBITDA of $290,000.

Important: This $100,000 is the net result of the two compensation adjustments already shown. It must not be added again as a separate normalization adjustment.

WHAT THIS MEANS FOR BUSINESS VALUE

 SDE and Normalized EBITDA Measure Different Buyer Economics 

Recast SDE of $540,000 represents the hypothetical owner-operator earnings measure. Normalized EBITDA of $390,000 represents operating earnings after deducting the cost of management required to replace the owner.

Neither figure alone establishes business value. The appropriate earnings measure must be matched with comparable transaction evidence, consistent valuation-multiple definitions, company-specific risk, and the relevant enterprise-to-equity considerations.

Fictional educational illustration only. The example assumes one working owner, $250,000 of compensation and benefits previously reflected in reported EBITDA, fully burdened replacement compensation of $150,000, and no additional discretionary, nonrecurring, or nonoperating adjustments. Actual financial normalization may require additional analysis of multiple owners, business necessity, related-party transactions, operating risks, and supporting financial records. This exhibit is not a completed appraisal, Quality of Earnings report, or independent conclusion of business value.

INDEPENDENT VALUATION & FINANCIAL ANALYSIS

Need an Independent Review of Your Normalized Earnings?

Seller-proposed add-backs, owner compensation, and replacement-management assumptions can materially affect business value and acquisition decisions. Business Valuation Advisors provides independent business valuation and Quality of Earnings analysis to evaluate these adjustments against financial records and market evidence.

  Schedule a Confidential Valuation Discussion  

Discuss your valuation purpose, available financial information, and appropriate engagement scope.

SELLER ADD-BACKS & NORMALIZATION
What Is a Legitimate Seller Add-Back?
Owner Compensation & Benefits

For SDE, one owner’s compensation and benefits are commonly added back because the buyer is assumed to replace that owner-operator role. For normalized EBITDA, owner compensation is generally adjusted to a market-based replacement cost rather than simply removed.

Discretionary Owner Expenses

Personal vehicles, travel, meals, club dues, family expenses, or other owner-specific costs may be added back when they are truly discretionary, properly documented, and not required to operate the business under new ownership.

Nonrecurring Expenses

One-time legal matters, unusual professional fees, relocation costs, casualty losses, or other expenses that are not expected to recur may qualify for normalization. The adjustment should reflect a genuinely unusual event rather than a normal cost that happens to fluctuate from year to year.

Related-Party & Nonoperating Items

Related-party rent, management fees, shareholder transactions, or nonoperating income and expenses may require adjustment when the recorded amount differs from market terms or does not relate to ongoing operations. These items should be normalized to the economics expected under an independent buyer.

Common Add-Backs Buyers and Lenders May Challenge

Eight Financial Adjustments That Require Independent Review

An expense does not automatically qualify as a seller add-back simply because it is described as discretionary, unusual, or nonrecurring. Buyers, lenders, and valuation professionals evaluate whether each adjustment is documented, economically supportable, and consistent with the earnings measure being analyzed.

The following eight categories frequently require additional scrutiny during business valuation, Quality of Earnings (QoE), and acquisition financial due diligence.

REVIEW FACTOR 01

Unsupported Personal or Discretionary Expenses

Personal travel, vehicles, meals, and other owner-specific expenses require documentation demonstrating that the cost was recorded in the financial statements and is not necessary for ongoing operations.

REVIEW FACTOR 02

Recurring "One-Time" Expenses

Legal fees, repairs, consulting, recruiting, and marketing costs may be characterized as unusual even when similar expenditures recur. Normalized earnings should retain a reasonable allowance for ongoing expenses.

REVIEW FACTOR 03

Future Savings Not Yet Realized

Expected layoffs, vendor savings, planned rent reductions, and anticipated efficiencies are not equivalent to historical earnings. Their inclusion requires support for implementation, timing, cost, and probability.

REVIEW FACTOR 04

Owner Compensation Without Replacement Cost

Adding back all owner compensation can overstate normalized EBITDA when the owner performs necessary functions. A market-based replacement expense should reflect the required management responsibilities and labor.

REVIEW FACTOR 05

Duplicate or Overlapping Adjustments

The same expense must not be adjusted twice through overlapping add-backs, owner compensation adjustments, or earnings reconciliations. Every proposed adjustment should be traceable to the underlying financial records.

REVIEW FACTOR 06

Necessary Operating Expenses

Payroll, insurance, software, maintenance, professional fees, marketing, and other expenses needed to sustain operations generally cannot be removed simply because a buyer expects to manage them differently.

REVIEW FACTOR 07

Unverified Related-Party Adjustments

Related-party rent, management fees, compensation, and other arrangements require market-based evaluation. The appropriate adjustment is generally the supportable difference from market economics, not necessarily the full expense.

REVIEW FACTOR 08

Adjustments Inconsistent With Market Multiples

Even a legitimate earnings adjustment may produce a misleading valuation when normalized SDE or EBITDA is paired with a multiple derived from a different earnings definition, buyer profile, or transaction population.

BVA ANALYTICAL STANDARD

A Claimed Add-Back Is Not Necessarily an Accepted Adjustment

Business Valuation Advisors evaluates proposed adjustments against the underlying accounting records, supporting documentation, historical recurrence, operational necessity, and appropriate market compensation assumptions.

The objective is to reconstruct sustainable, transferable earnings—not maximize the seller's reported SDE or EBITDA. Adjustments may increase, decrease, or leave normalized earnings unchanged depending on the evidence.

Related service: Learn how BVA evaluates proposed earnings adjustments through its  Quality of Earnings & Financial Due Diligence Services .

Why Owner Compensation Is the Most Important SDE-to-EBITDA Adjustment

How BVA Evaluates Owner Roles, Market Compensation & Transferable Earnings

In privately held businesses, owners frequently perform multiple operating roles while controlling their own compensation. Salary, bonuses, payroll taxes, retirement contributions, insurance, and other benefits may therefore reflect a combination of necessary management compensation and owner-specific economics.

A defensible earnings normalization must distinguish the compensation actually paid to the owner from the market cost of replacing the owner's responsibilities. The objective is to measure sustainable operating earnings under an economically supportable management structure.

BVA NORMALIZATION PRINCIPLE

Owner compensation is replaced with market-rate operating compensation — not automatically eliminated.

For normalized EBITDA, BVA generally adds back owner compensation previously deducted in reported earnings and then subtracts the fully burdened market cost of the management and labor needed to replace the owner's operating responsibilities. Other normalization adjustments, when appropriate, are evaluated separately.

ILLUSTRATIVE FINANCIAL EXHIBIT

Owner Compensation & Normalized EBITDA

Assume an owner-operated business pays its working owner $250,000 annually in expensed compensation and benefits. An independent analysis indicates that equivalent management responsibilities could be replaced for $150,000 in fully burdened annual compensation.

ACTUAL OWNER COMPENSATION

$250,000

Previously expensed

MARKET REPLACEMENT COST

$150,000

Fully burdened annual cost

NET EBITDA ADJUSTMENT

+$100,000

Increase to reported EBITDA

Normalization Formula

Reported EBITDA  + Actual Expensed Owner Compensation  - Market Replacement Compensation

Reported EBITDA + $250,000 - $150,000

= Reported EBITDA + $100,000

Illustrative figures only. The $100,000 represents an adjustment to reported EBITDA, not the company's total normalized EBITDA. The example assumes that the owner's compensation was previously expensed and no additional adjustments are required.

How BVA Evaluates Reasonable Replacement Compensation

01 / RESPONSIBILITIES

Owner's Operating Roles

Identify responsibilities for sales, customer relationships, financial management, technical operations, supervision, and strategic leadership.

02 / LABOR REQUIREMENTS

Hours & Replacement Staffing

Determine the owner's actual working hours, whether duties can be absorbed by existing personnel, and whether multiple employees must be hired.

03 / MARKET BENCHMARKING

Fully Burdened Compensation

Evaluate geographic labor markets, company size, industry, experience requirements, payroll taxes, benefits, and other employment costs.

04 / FINANCIAL RECONCILIATION

Earnings Consistency

Confirm compensation was expensed in reported earnings, avoid duplicate adjustments, and reconcile normalized EBITDA to the appropriate market multiple.

Independent Compensation Benchmarking

The  U.S. Bureau of Labor Statistics Occupational Employment and Wage Statistics (OEWS)  provides occupational wage estimates by occupation and geographic area that may be useful when assessing reasonable replacement compensation.

Because OEWS wage estimates exclude employer-paid nonwage benefits, a fully burdened compensation analysis should separately consider employer payroll taxes, employee benefits, actual job responsibilities, hours worked, and staffing requirements. Published wage statistics are a reference point rather than a substitute for a company-specific analysis. See the  BLS OEWS Frequently Asked Questions  for additional information on the scope and limitations of the wage data.

Illustrative assumption: The $150,000 replacement-management cost used in this example is hypothetical and is not presented as a compensation estimate derived from BLS data.

When Owner Compensation Is Below Market

Compensation normalization does not always increase EBITDA. If an owner receives less than the economic cost of replacing their operating responsibilities, normalized EBITDA may need to decrease to reflect economically necessary operating expenses.

Critical distinction: Only compensation and benefits actually deducted in reported earnings should be added back in the normalization bridge. Shareholder distributions or other payments that were not previously expensed cannot be added back as though they reduced EBITDA.

How Seller Add-Backs Affect EBITDA & Business Value

A Financial Exhibit Comparing Seller Claims, Accepted Adjustments & Value Indications

Seller-proposed add-backs can materially affect the earnings used in a business valuation. However, an expense does not automatically qualify for normalization simply because the seller identifies it as discretionary, unusual, or nonrecurring.

Business Valuation Advisors evaluates proposed adjustments against financial records, historical recurrence, operational necessity, and market evidence. The objective is to reconstruct sustainable earnings—not maximize the seller's reported profitability.

STARTING EBITDA

$400K

Before disputed adjustments

SELLER CLAIMED

+$45K

Three proposed add-backs

ACCEPTED ADJUSTMENT

+$20K

Hypothetically supported

BVA SELLER ADD-BACK EXHIBIT 01

 Claimed vs. Accepted Earnings Adjustments 

Consider a separate fictional acquisition candidate with $400,000 of normalized EBITDA before three disputed seller adjustments. Its necessary management costs and other ordinary expenses are already reflected in the starting amount.

The seller proposes $45,000 in additional add-backs. For this educational example, assume the review supports $20,000, while $25,000 remains unaccepted because the expenses are necessary or insufficiently documented.

   
Proposed Adjustment Seller Claim Accepted Illustrative Review Finding
Completed software conversion consulting $20,000 $20,000 Accepted on the assumption that records substantiate a completed, nonrecurring implementation expense and all necessary continuing costs remain in earnings.
Recurring customer marketing costs $15,000 $0 Not accepted. The expense is assumed necessary to sustain customer acquisition and ongoing sales.
Claimed personal travel $10,000 $0 Not accepted without documentation establishing the personal portion and confirming that the expense is not operationally necessary.
TOTAL ADJUSTMENTS $45,000 $20,000 $25,000 of the seller's claims are not accepted in this illustration.

COMPOSITION OF THE $45,000 SELLER CLAIM

$20K
$25K

Green represents hypothetically accepted adjustments. Slate represents claimed adjustments not accepted in the review. The treatment of actual expenses depends on supporting evidence and the applicable earnings definition.

BVA SELLER ADD-BACK EXHIBIT 02

 From Seller-Claimed EBITDA to Evidence-Supported Earnings 

BEFORE DISPUTED ADJUSTMENTS

$400,000

Starting EBITDA

ALL SELLER CLAIMS INCLUDED

$445,000

Before independent review

AFTER REVIEW

$420,000

Hypothetically supported EBITDA

ACCEPTED EBITDA RECONCILIATION

$400,000 + $20,000 = $420,000

Only the $20,000 supportable adjustment is included. The $25,000 in unaccepted seller claims is excluded from the reviewed earnings indication.

This is a separate educational case from the earlier owner-compensation example. The $400,000 starting EBITDA assumes management compensation and ordinary operating expenses have already been appropriately normalized.

BVA SELLER ADD-BACK EXHIBIT 03

 How Unaccepted Add-Backs Can Distort an Enterprise-Value Indication 

For demonstration only, assume a fixed hypothetical 4.0× EBITDA multiple applied to three different earnings amounts. The calculation illustrates the potential mathematical effect of accepting or rejecting seller adjustments. It is not a market-derived valuation multiple.

BEFORE CLAIMED ADD-BACKS

$1.60M

$400K × 4.0×

ALL SELLER CLAIMS ACCEPTED

$1.78M

$445K × 4.0×

AFTER INDEPENDENT REVIEW

$1.68M

$420K × 4.0×

ILLUSTRATIVE ENTERPRISE-VALUE INDICATIONS

Starting EBITDA $1,600,000

Seller-Claimed EBITDA $1,780,000

Evidence-Supported EBITDA $1,680,000

MATHEMATICAL IMPACT OF UNACCEPTED ADJUSTMENTS

$100,000

$25,000 × 4.0× = $100,000

Applying the assumed multiple to the $25,000 of unaccepted add-backs produces a $100,000 difference between the seller-claimed and evidence-supported enterprise-value indications.

All three calculations use the same hypothetical 4.0× multiple solely to isolate the arithmetic effect of adjustments. The multiple is not independently supported by transaction evidence. Actual valuation analysis may require a different multiple, other valuation methods, enterprise-to-equity adjustments, or additional consideration of operating and ownership risks.

BVA INDEPENDENT ADJUSTMENT REVIEW

 Four Questions Before Accepting an Add-Back 

01 / FINANCIAL TRACEABILITY

Was the Expense Recorded?

Reconcile the proposed adjustment to the general ledger, financial statements, invoices, and supporting records.

02 / RECURRING ECONOMICS

Will the Cost Continue?

Assess historical recurrence, operational necessity, replacement costs, and whether a future owner would continue to incur a comparable expense.

03 / ECONOMIC CONSISTENCY

Is the Adjustment Appropriate?

Confirm consistency with the relevant earnings measure, owner compensation, market terms, and expected operating requirements.

04 / DOUBLE-COUNTING

Has It Already Been Adjusted?

Ensure the same expense is not removed more than once through owner compensation, discretionary costs, or overlapping normalization schedules.

BVA VALUATION INTERPRETATION

 An Accepted Add-Back Is Not Automatically an Increase in Fair Market Value. 

An accepted adjustment can affect the earnings input used in a valuation model. However, the ultimate conclusion of business value depends on the appropriateness of the valuation multiple or discount rate, the quality and sustainability of earnings, expected cash flows, company-specific risks, and the applicable standard of value.

A higher seller-adjusted EBITDA figure does not eliminate the need to test revenue quality, market compensation, working capital, capital expenditures, debt obligations, and transaction comparability. Unsupported adjustments may also raise concerns about financial reporting reliability.

RELATED BVA ANALYSIS

Quality of Earnings:  Seller Add-Back Verification & Financial Due Diligence 

Business Valuation Multiples:  How EBITDA and SDE Multiples Affect Business Value 

Fictional educational illustration only. The $400,000 starting EBITDA, $45,000 of seller claims, $20,000 accepted adjustment, and $25,000 unaccepted adjustments are hypothetical. This is a separate example from the preceding owner-compensation reconciliation. The 4.0x EBITDA multiple is assumed solely to demonstrate mathematical sensitivity and is not presented as a market-derived multiple. Resulting enterprise-value indications are not equity values, transaction prices, or independently concluded fair market values. Actual valuation requires company-specific financial analysis, appropriate market evidence, risk assessment, and reconciliation of relevant valuation approaches.

Related analysis: See how business valuation multiples translate normalized SDE and EBITDA into indications of value, and why the selected multiple must be consistent with the earnings measure being analyzed.

Frequently Asked Questions About SDE, EBITDA & Seller Add-Backs

  • When should I use SDE instead of EBITDA?

    SDE is generally most appropriate when the likely buyer will personally replace one owner’s operating role. EBITDA is generally more appropriate when the business is professionally managed or when a buyer must continue paying market compensation for management after the transaction. Business size can provide context, but the owner’s role, management structure, and likely buyer universe are more important than any single revenue threshold.

  • Is SDE usually higher than EBITDA?

    For an owner-operated business, SDE is often higher than normalized EBITDA because SDE generally includes one owner’s compensation and benefits as part of the economic benefit available to an owner-operator. Normalized EBITDA generally reflects the market cost of replacing the operating responsibilities that must continue after the owner leaves.

  • What expenses can be added back to SDE or EBITDA?

    Potential adjustments may include supportable owner-specific expenses, discretionary benefits, nonrecurring costs, nonoperating items, and related-party transactions that differ from market terms. Whether an item qualifies depends on the facts, documentation, and the earnings measure being calculated.

  • Can the owner’s entire salary be added back?

    For SDE, one owner’s compensation and benefits are commonly added back when the buyer is expected to perform that owner’s role. For normalized EBITDA, the owner’s actual compensation may be added back, but an appropriate market-based replacement compensation expense generally must also be reflected.

  • Can I apply an EBITDA multiple to SDE?

    Generally, no. SDE and EBITDA represent different earnings definitions and are associated with different transaction markets and valuation multiples. Applying an EBITDA multiple to SDE, or an SDE multiple to EBITDA, can materially distort the resulting indication of value.

  • Are seller add-backs automatically accepted by buyers or lenders?

    No. Buyers, lenders, and valuation professionals may challenge adjustments that are unsupported, recurring, speculative, duplicated, or necessary to operate the business. A claimed add-back should be traceable to the financial statements and supported by a reasonable economic explanation.

  • Do depreciation and amortization get added back?

    Depreciation and amortization are excluded in the calculation of EBITDA and are commonly included in the bridge from net income to SDE. However, adding back accounting depreciation does not mean that capital expenditures or asset replacement requirements can be ignored when evaluating the economics of the business.

  • How do seller add-backs affect business value?

    A supportable adjustment changes normalized earnings, which can change the mathematical value indication when a valuation multiple is applied. The ultimate effect on value also depends on whether the adjustment is accepted and whether the selected multiple is appropriate for the normalized earnings measure.

ABOUT THE AUTHOR

About Joshua Himan, CVA®

Joshua Himan, CVA®, is the founder of Business Valuation Advisors, Inc. and has more than 15 years of experience evaluating privately held businesses, financial performance, and acquisition opportunities.

His work includes Seller's Discretionary Earnings (SDE) reconstruction, EBITDA normalization, owner-compensation analysis, Quality of Earnings, business valuation, and buy-side financial due diligence. Having evaluated thousands of private businesses and participated in acquisitions, Joshua brings a practical understanding of how reported earnings translate into sustainable cash flow, business risk, and transaction value.

PROFESSIONAL CREDENTIALS

CVA® | BCA® | CMEA® | FMVA®

M.S. Applied Economics — Johns Hopkins University  M.S. Finance — The George Washington University 

BVA's approach emphasizes independently supported financial adjustments, economically appropriate valuation methods, and documented conclusions rather than simply accepting seller-proposed earnings or valuation multiples.

View Professional Credentials Client Reviews

NEED HELP NORMALIZING EARNINGS?

Get an Independent Business Valuation or Quality of Earnings Analysis

Seller add-backs, owner compensation, normalized SDE, and EBITDA can materially affect a business valuation, acquisition decision, or financing analysis. Business Valuation Advisors helps business owners, buyers, lenders, and advisors evaluate these adjustments using documented financial information and market-based assumptions.

Whether you are preparing to sell a business, evaluating an acquisition, supporting SBA financing, or determining a defensible private-company value, BVA can help translate reported financial results into supportable normalized earnings.

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