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The Hidden Profit in Your Business

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Hey there entrepreneurs,

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Welcome to the Better Business Brief, where I share takeaways from:

• running businesses I’m building to sell for millions
• My advisory with other business owners building to sell for millions
• tips and tricks you can use to do the same

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If you’ve ever thought about buying or selling a business, or helping others do it, you have to understand one core number.

That number?

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​SDE — Seller’s Discretionary Earnings.

So today, in less than 5 minutes, I’ll give you: ​ 📊 What SDE Actually Is 🧾 Why It’s Often Misunderstood 💵 How to Boost It Before You Sell

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Most business owners think they know what they make.

But when it’s time to sell, the number they hand over doesn’t match the reality of what a buyer can expect to take home.

That mismatch can cost you hundreds of thousands of dollars on a deal, or even blow it up entirely.

What Is SDE?

SDE = the true owner benefit from the business.
It’s net profit + all the “personal” stuff you’ve run through the business that isn’t essential for operations.

Think:

• Your car lease
• Family member payroll
• Meals, memberships, travel, even your deadbeat nephew’s “salary”
• That $100k machine you bought once and will never replace

SDE helps buyers know: How much cash could I take home if I owned this?

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Why SDE Matters More Than Net Profit

Let’s say a business shows $1M in net income on the P&L.
Looks solid, right?

But after adjusting for non-essential expenses, personal write-offs, and one-time costs…
You realize the true SDE is closer to $1.5M.

That extra $500k/year could mean you sell the business for $1M more, or justify a higher multiple.

This is why serious buyers don’t just glance at tax returns.
They dig.

Because if you’re a buyer and the seller hasn’t done this exercise?
You’re either underestimating the cash flow, or getting handed a mess you’ll need to untangle.

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How to Clean Up Your SDE Before a Sale

If you’re planning to sell in the next 1–5 years, start this process now:

✅ Remove non-essential owner perks
✅ Track and label add-backs clearly
✅ Prepare an “adjusted P&L” template (or ask us for one)
✅ Align your CPA to understand buyer expectations

Buyers will pay more for a business they can understand and trust.

And if you’re buying?
Always look past the net. Uncover every hidden benefit, or hidden liability.

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At Scale for Sale, we’ve helped sellers add six to seven figures or more to their exit price just by cleaning up their SDE.
Sometimes they even decide not to sell once they realize how much more profitable the business really is. Catch the full conversation we had about this topic on my live show here.

Whether you’re buying, selling, or just want to build a more valuable business, understanding SDE is a must.

And if you want help making sense of your numbers, get in touch with us at scaleforsale.com.

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If you like these ideas or found this informative, stick around and subscribe. I do this newsletter every week.

If you did, share it with a friend who may too, as this is the best way for me to grow it and make this better.

They can even sign up here :)
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Happy value-building to you!

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See you next time for Better Business Brief,

-Brody