Does Florida's lack of a state income tax affect how SDE is calculated for my business?

Florida's zero state income tax means owner-operators often run more personal expenses through the business, which inflates claimed SDE — but experienced buyers will push back hard on add-backs that aren't well-documented. Because SBA lenders underwriting Florida deals are accustomed to this pattern, they often apply a more conservative lens to add-backs than sellers expect. You'll want three years of consistent books and clear documentation for every add-back before you enter the market.

My Florida restaurant nets $180,000 after I pay myself — is that my SDE?

Not necessarily — you need to add your salary, personal benefits, depreciation, amortization, interest, and any one-time expenses back to that $180,000 to arrive at true SDE. For example, if you pay yourself $75,000, carry $20,000 in depreciation on equipment, and have $8,000 in personal health insurance run through the business, your SDE is closer to $283,000. Florida restaurants typically sell at 1.5x–2.5x SDE, so the difference between presenting $180,000 versus $283,000 in earnings could mean $250,000+ in sale price.

At what revenue or earnings level should I switch from SDE to EBITDA when positioning my Florida business for sale?

The general industry threshold is $1 million in annual owner earnings — below that, SDE is standard; above it, EBITDA becomes the primary metric buyers and lenders use. In practice, this transition often happens earlier in Florida's coastal markets (Miami, Tampa, Orlando) where private equity and strategic buyers are more active and comfortable with EBITDA-based pricing. If your business has a management team that could run without you, EBITDA is worth calculating regardless of size.

Can I use both SDE and EBITDA in my Confidential Information Memorandum (CIM)?

Yes, and for businesses near the transition threshold ($700K–$1.2M in earnings), presenting both is often the right move to attract the widest buyer pool. A CIM that shows SDE for individual operator buyers and restated EBITDA for institutional or strategic buyers signals sophistication and broadens your audience. Just make sure the math is consistent and clearly labeled — inconsistencies between the two calculations are a due diligence red flag that erodes buyer confidence quickly.

Will an SBA lender use SDE or EBITDA to approve financing for a buyer purchasing my Florida business?

SBA lenders primarily use a debt service coverage analysis based on the business's documented cash flow — which closely mirrors SDE for smaller deals. For loans under $5 million (the SBA 7(a) limit), lenders typically require at least 1.25x debt service coverage, meaning the business must generate 25% more in verified cash flow than the annual loan payments. In Florida, SBA lending is extremely active, and understanding how lenders will reconstruct your earnings helps you anticipate what deal structures are actually financeable.

How do I know if a buyer's offer is based on SDE or EBITDA multiples?

Ask directly — any credible buyer should be able to explain what earnings figure they're applying a multiple to. If a buyer offers $900,000 for a business with $300,000 SDE, that's a 3x SDE deal; if they reference $180,000 EBITDA and a 5x multiple, that's a $900,000 EBITDA deal — same price, very different assumptions about your role and the business's structure. Knowing which method is being used lets you evaluate whether the multiple is fair for your industry and whether the buyer's assumptions about owner involvement match reality.

SDE vs EBITDA: Which Valuation Method to Use

If you've started exploring what your Florida business is worth, you've almost certainly run into two terms: SDE (Seller's Discretionary Earnings) and EBITDA (Earnings Before Interest, Taxes, Depreciation, and Amortization). These aren't just accounting acronyms — they're the two primary lenses through which buyers and their lenders evaluate what your business is actually worth. Pick the wrong one to present, and you leave money on the table or confuse the right buyer before they ever make an offer.

Here's the practical breakdown every Florida business owner needs before entering a sale process.

What Is SDE and Who Uses It?

SDE — Seller's Discretionary Earnings — represents the total financial benefit a single working owner-operator derives from the business in a given year. The calculation starts with net profit and then adds back: the owner's salary and benefits, depreciation, amortization, interest, one-time or non-recurring expenses, and any personal expenses run through the business (health insurance, vehicle, cell phone, travel, etc.).

SDE is the dominant valuation method for small businesses — typically those generating under $1 million in annual earnings. In Florida, this covers the vast majority of independent restaurants, retail shops, service businesses, salons, small medical practices, and owner-operated trades companies. If you're the primary operator and your compensation is baked into the business's financials, SDE is almost always the right starting point.

A concrete example: Say you own an owner-operated landscaping company in Sarasota. Your P&L shows a net profit of $85,000. But you pay yourself a $90,000 salary, run $18,000 in personal vehicle expenses through the business, carry $12,000 in depreciation on equipment, and had a one-time $15,000 roof repair last year. Your SDE is actually $220,000 — and that's the number a buyer prices against, not the $85,000 on your tax return.

What Is EBITDA and Who Uses It?

EBITDA strips out the owner's personal compensation and focuses on the operating earnings of the business itself, assuming a professional management team is in place. It's calculated as: Net Income + Interest + Taxes + Depreciation + Amortization — but critically, it does not add back owner salary the way SDE does, unless that salary is above or below market rate for the role.

EBITDA is the standard for larger businesses — typically those with $1 million or more in earnings — where the buyer is purchasing a company that runs independent of any single person. Private equity groups, strategic acquirers, and institutional buyers all work in EBITDA. SBA lenders also shift toward EBITDA analysis as deal size grows. In Florida, this typically applies to multi-location businesses, manufacturing operations, larger healthcare groups, logistics companies, and established B2B service firms.

Using the same Sarasota landscaping company: if it had $2.8 million in revenue, employed a full-time operations manager, and generated $420,000 in EBITDA independent of the owner's day-to-day involvement, a buyer would apply an EBITDA multiple — not SDE — because they're buying a system, not a job.

Valuation Multiples: What Florida Buyers Are Actually Paying

The method you use determines the multiple applied — and these ranges matter enormously when you're calculating what you'll walk away with.

SDE Multiples in Florida

Restaurants and food service: 1.5x–2.5x SDE, depending on lease terms, concept strength, and whether it's a franchise
Retail businesses: 1.5x–2.25x SDE, heavily influenced by inventory levels and e-commerce competition
Service businesses (cleaning, landscaping, pest control): 2.0x–3.5x SDE, with recurring revenue contracts commanding the upper end
Auto repair and trades: 2.0x–3.0x SDE, boosted significantly by established customer lists and skilled technician retention
Medical and dental practices: 0.5x–1.2x revenue (or 2.0x–3.5x SDE), with location and payer mix as key drivers

EBITDA Multiples in Florida

B2B services and staffing: 4x–7x EBITDA
Manufacturing and distribution: 4x–6x EBITDA
Technology and SaaS-adjacent businesses: 6x–10x EBITDA or higher
Healthcare services (multi-location): 5x–8x EBITDA
Hospitality and lodging: 5x–8x EBITDA, with Florida's tourism-driven coastal markets pushing toward the top of that range

Florida's unique economic mix — tourism, retiree migration, a growing tech corridor in Tampa and Miami, and a massive small business base — means you'll see these multiples shift based on geography too. A pool service route in Pinellas County with 200 recurring accounts trades at a premium versus the same revenue in a rural inland market, simply because buyer demand is higher and the customer base is more stable.

The Add-Back Problem: Why This Gets Messy

One of the most common mistakes Florida business sellers make is assuming every dollar they can call a "business expense" becomes a clean add-back. Buyers and their lenders — particularly SBA lenders, who finance the majority of small business acquisitions under $5 million — will scrutinize every add-back you claim. Undocumented personal expenses, inconsistent categorization across multiple years, or expenses that have no clear paper trail get rejected outright during due diligence.

Florida has no state income tax, which often means owner-operators are more aggressive about running personal expenses through the business compared to owners in high-tax states. Buyers know this. Experienced acquirers in Florida routinely discount claimed add-backs by 20–30% as a starting negotiating position unless they're clearly supported by documentation.

The practical takeaway: get 3 years of clean, consistent books before you go to market. Work with a CPA experienced in business sales — not just tax preparation — to reconstruct your financials in a format that will hold up to buyer scrutiny.

When the Method Shifts Mid-Transaction

Here's something most sellers don't anticipate: the valuation method can shift depending on who the buyer is. If you list a business initially targeted at individual owner-operators (using SDE), but a strategic buyer or small PE firm becomes interested, they'll reframe the conversation around EBITDA — often because it makes the price look higher than it actually is relative to what they're getting operationally.

This isn't necessarily bad. A sophisticated buyer applying a 5x EBITDA multiple to a business your broker correctly positioned using SDE might actually produce a higher offer than the SDE-multiple buyer pool. Understanding both methods means you can evaluate offers apples-to-apples regardless of how the buyer presents them.

Which Method Should You Lead With?

The honest answer: the one that produces the defensible higher valuation for your specific business, presented to the audience most likely to buy it. For most Florida small business owners, that's SDE. For those running businesses with strong management infrastructure, multiple locations, or institutional appeal, EBITDA opens the door to a higher-value buyer pool.

What you should never do is guess. A Florida-based broker with experience in your specific industry and deal size will run both calculations, tell you which method positions you best, and help you prepare the financial narrative that holds up through due diligence.

SDE vs EBITDA: Which Valuation Method Gets Florida Business Sellers More Money?