Correct multiple calculation on SDE

May 15, 2026

by a searcher from Edith Cowan University in Perth WA, Australia

Hi I'm in Australia. I'm currently looking at a business to acquire but I'm getting conflicting advice on how to determine 'my SDE' and multiple to offer rather than the brokers SDE. The Brokers SDE is $840k, and the asking price is $2,750k There are two outgoing working owners. And the broker has suggested a GM could come in and run the business for around $150k per year. What is the best way to think about this and structure my offer? The brokers GM at $150k is ridiculously low - a decent GM would cost $250k to $300k including bonus and retirement plan. My plan would be to become the GM/CEO myself and perhaps hire an assistant to support me at around $150k per year all in. That structure would reasonably replace the two outgoing owners. If I value my own GM role at say $250k, do I include this in the SDE multiple? if not, then the offer would look something like this: $840k - $150k = $690k ($150k for the assistant) $690k x 3.3x = $2,277k (3.3 feels like a fair multiple for this business) Does this logic make sense? This offer is much lower than their asking price so I want to be able to justify it confidently. Thanks!

Reply by a professional
from Bishop's University in Moncton, NB, Canada

You will never make headway debating how a business price is arrived at. This just leads to conflict. What you do is calculate what makes sense, and present your offer. "Based on the information provided and our analysis, here is what we can pay for the business and the term we would require.' Then, you negotiate.

Reply by an investor
from McGill University in San Diego, CA, USA

Stephen, a useful starting point is to run the analysis through the bank's lens, not the broker's or even your own. In the US, lenders often underwrite off tax returns and historical financials, not the broker's CIM. A broker SDE is just a starting point. A good QoE provider can help pressure-test add-backs, owner compensation adjustments, and what the true normalized earnings actually are. One nuance that may be relevant. Banks often have their own view of replacement compensation. For example, lenders here frequently ask for a personal financial statement. If a buyer plans to pay themselves materially below market, or below what their living expenses suggest is sustainable, lenders may adjust compensation upward in their underwriting. Stated differently, "I only need $100k" may not matter if the bank thinks you need to make $250k to keep the lights on. I'd separate two questions: What cash flow will a lender actually underwrite? What compensation structure works for you personally? Banks tend to be conservative. If they won't underwrite the cash flow, your personal assumptions become less relevant. I would build the model using a few scenarios: • Broker SDE • Bank-adjusted SDE • Your own operating plan Then see where all three land. The gap can tell you a lot.

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