SDE multiples by industry
If you run an owner-operated business and someone tells you it's worth "3x," they almost certainly mean 3x your Seller's Discretionary Earnings. Here are the typical multiples buyers pay across twelve sectors, what moves a business within its range, and how to apply the math to your own situation.
- SDE is the right profit measure if you're an owner-operator earning under roughly $1–2M per year from the business. It's net profit plus your salary plus add-backs.
- Typical range: 2x–4x SDE covers most owner-operated small businesses. Recurring-revenue sectors like pest control and insurance agencies reach 3.5–5.5x. Thin-margin businesses (restaurants, general retail) land closer to 1.5–3x.
- SDE multiples look lower than EBITDA multiples but they're not measuring the same thing — a bigger profit figure gets a smaller multiple. The resulting valuation lands in a similar place.
- What moves you within your range: recurring revenue, year-over-year growth, clean books with documented add-backs, and low owner dependence.
- The table below covers twelve industries with SDE multiple ranges, typical earnings tiers, and the buyer type most likely to be writing the check.
What SDE actually measures
SDE stands for Seller's Discretionary Earnings. It's the profit measure built around a single owner-operator question: how much does this business put in the owner's pocket each year?
You start with net profit from the income statement, then add back:
- The owner's salary and payroll taxes
- Owner's health insurance, retirement contributions, and benefits run through the business
- Personal vehicle expenses and any personal spending mixed into business accounts
- One-time or non-recurring costs (a lawsuit settlement, a one-off consulting fee, a major one-time repair)
- Depreciation and amortization on assets that won't need near-term replacement
The result is the total economic benefit available to the owner each year, which is what a buyer is really paying for. Two businesses with the same revenue can have very different SDE if one owner pays themselves $80K and the other pays themselves $300K. SDE normalizes that.
The boundary where advisors typically switch from SDE to EBITDA sits around $1–2 million in earnings. Above that, businesses usually have real management teams, the owner's pay matters less to the overall economics, and institutional buyers start showing up. Below it, the owner often is the business, and SDE is what a buyer evaluates. If you're near the boundary, it's worth running both.
Why SDE multiples look lower than EBITDA multiples
SDE includes the owner's salary; EBITDA doesn't. That means SDE is a larger profit number for the same business. Because the base is larger, the multiple applied to it is smaller, but the two methods arrive at similar valuations.
A quick example: a business generates $600K in SDE (which includes $200K in owner pay and benefits). Strip out owner compensation and you get $400K in EBITDA. If comparable businesses in that sector trade at 5x EBITDA, the value is $2M. At 3.3x SDE, you also get $2M. Neither multiple is "better" than the other — they're two ways to arrive at the same number. The mistake is comparing SDE multiples to EBITDA multiples as if they're measuring the same profit base. They're not.
For the full picture of what drives value in each tier — including how larger businesses using EBITDA tend to see higher stated multiples — see the EBITDA & SDE multiples by industry report.
SDE multiples by industry (2026)
The table below shows indicative SDE multiple ranges for owner-operated small businesses across twelve sectors. It includes the typical SDE earnings range where these multiples apply and the buyer type most active in each sector. Sectors are ranked from highest typical multiple to lowest.
| Industry | SDE Multiple Range | Typical SDE Earnings | Common Buyer Type |
|---|---|---|---|
| Pest Control | 3.5–5.5x | $200K–$1M | PE roll-up platform |
| Insurance Agency (book-based) | 3.0–4.5x | $150K–$800K | PE roll-up / strategic |
| Accounting & CPA Firms | 2.5–4.0x | $200K–$900K | Individual / small firm acquirer |
| E-commerce & Online Retail | 2.5–4.0x | $150K–$900K | Individual buyer / aggregator |
| HVAC & Home Services | 2.5–4.0x | $200K–$1M | PE roll-up / individual |
| Healthcare & Medical Practices | 2.5–4.0x | $250K–$1M | PE / DSO or group practice |
| Auto Repair & Services | 2.0–3.5x | $150K–$600K | Individual buyer |
| Professional Services | 2.0–3.5x | $150K–$700K | Individual buyer / competitor |
| Marketing & Creative Agencies | 2.0–3.5x | $150K–$700K | Individual buyer / competitor |
| Construction & Trades | 2.0–3.5x | $200K–$800K | Individual buyer / regional |
| Restaurants & Food Service | 2.0–3.0x | $100K–$600K | Individual buyer |
| General Retail / Main Street | 1.5–2.5x | $100K–$400K | Individual buyer |
Indicative ranges for owner-operated small businesses priced on Seller's Discretionary Earnings. Actual multiples vary by financial quality, growth, recurring revenue, and deal structure. See methodology note below.
Why pest control and insurance sit at the top
The two sectors with the highest SDE multiples share the same root cause: predictable, recurring revenue. Pest control businesses run on service contracts — customers pay automatically, routes are dense and efficient, and churn is low. Insurance agencies earn policy renewals year after year with minimal incremental effort. Both sectors also attract well-capitalized platform buyers running active roll-ups. When a PE-backed roll-up is buying several businesses a year in your sector, they move fast and compete hard on price. That competition pushes multiples up.
Healthcare and HVAC share similar roll-up dynamics but carry more complexity. Healthcare deals in the $250K–$1M SDE range typically involve dental, veterinary, or specialty practices where DSOs and PE-backed groups are consolidating quickly. HVAC at this size attracts regional PE platforms and experienced operators. Both can reach the upper end of their SDE ranges, but owner dependence and licensing logistics matter more than in pest control.
What pulls a business toward the top of its range
The industry sets the range. These factors determine where you land inside it.
- Recurring revenue. Contracts, subscriptions, retainer agreements, and route-based services make your cash flow predictable. Buyers pay a meaningful premium for predictability at every deal size. If you don't have recurring revenue and your sector peers do, that's the first thing to fix.
- Consistent growth. Year-over-year revenue growth — even modest single-digit growth — signals a healthy business and reduces the buyer's risk. Flat revenue gets priced at the midpoint. Declining revenue gets priced at the floor, or worse, kills the deal.
- Clean, well-documented add-backs. SDE is only as defensible as the add-backs that compose it. If your accountant can't tie each add-back to a line on the income statement, a buyer's advisor will challenge it in diligence, and some of it will come out of the price. Preparing your financials properly before going to market is the single highest-return thing you can do.
- Low owner dependence. If the business runs only because you're there every day — for sales, for client relationships, for operational decisions — a buyer has to pay for the risk of the wheels coming off when you leave. Businesses with documented processes and a team that can function without the owner consistently earn the top of their sector's range.
- Manageable customer concentration. One client representing 20% or more of revenue triggers diligence scrutiny and sometimes requires deal structure concessions (escrow, earnouts) to account for the risk of losing that client post-close.
How to use this table to estimate your value
Start by calculating your SDE. Take last year's net profit, add back your salary, any personal benefits or expenses run through the business, and genuinely one-time costs. That's your SDE. The business valuation calculator walks through this with you and applies an industry-appropriate range automatically.
Then find your industry in the table above. Apply the low, mid, and high ends of the range and see where you land. If your SDE is $500K and your industry trades at 2.5–4.0x, your indicative range is $1.25M–$2.0M. That's a wide band by design — the factors in the previous section are what narrow it toward a specific number.
One place to cross-check: if your business is near the $1–2M SDE boundary and might attract institutional buyers, compare the SDE-based estimate to what you'd get using EBITDA. The full guide to business valuation covers both methods side by side. If the two estimates converge, you have a defensible anchor. If they diverge significantly, it usually means the EBITDA add-back calculation is off — owner comp is either too high or too low relative to what a market-rate replacement would cost.
The table gives you a realistic range. Getting to a specific number you can bring to a buyer requires your actual financials run against current comparables, which is what a qualified M&A advisor does. It's a free conversation with the right firm, and it typically reveals whether the top or bottom of the range is more realistic long before you go to market.
Methodology
The multiples in this report are indicative ranges aggregated from typical small and lower-middle-market transaction patterns for owner-operated businesses priced on Seller's Discretionary Earnings. They are calibrated to be internally consistent with the EBITDA-basis ranges published in ProCloser's EBITDA & SDE multiples by industry report: for any given business, applying the SDE multiple to the SDE profit figure and the EBITDA multiple to the EBITDA profit figure should yield valuations in a similar range. The "Typical SDE Earnings" column reflects the size band where SDE pricing is most commonly applied in practice — above roughly $1–2M in SDE, advisors typically switch to EBITDA. Buyer type designations reflect the most active acquirer categories at this size tier; actual buyers vary by geography, market conditions, and deal specifics. These figures are for orientation and sanity-checking only. They are not a valuation, appraisal, or guarantee of price. Real multiples vary by financial quality, growth trajectory, recurring revenue, customer concentration, owner dependence, and how the deal is structured. Engage a qualified advisor before making any decision based on these ranges.
ProCloser.ai. "SDE Multiples by Industry: 2026 Benchmark for Small Business Sales."
https://procloser.ai/blog/sde-multiples-by-industry/
Common questions about SDE multiples
What is a typical SDE multiple for a small business?
Most owner-operated small businesses sell for 2x to 4x SDE. The range shifts significantly by sector: restaurants and general retail trade closer to 1.5–3x, while recurring-revenue businesses like pest control and insurance agencies reach 3.5–5.5x. Growth, recurring revenue, and low owner dependence push a business toward the top of its sector's range. The table above breaks it down by industry.
How are SDE multiples different from EBITDA multiples?
SDE adds the owner's salary, benefits, and personal add-backs back into profit, so it's a larger number than EBITDA for the same business. A larger profit base gets a smaller multiple, but both methods arrive at similar valuations. Comparing SDE multiples to EBITDA multiples as if they measure the same profit figure is a common mistake. For businesses near the $1–2M earnings boundary, running both and checking whether they converge is a good sanity check.
Which industries have the highest SDE multiples?
Pest control (3.5–5.5x) and insurance agencies (3.0–4.5x) consistently earn the highest SDE multiples at the small business level. Both run on recurring revenue and attract PE-backed roll-up buyers who compete actively for quality businesses. Competition among buyers is what drives multiples up, and both sectors see more of it than most.
What add-backs count toward SDE?
Standard SDE add-backs include: the owner's salary and payroll taxes, owner's health insurance and retirement contributions, personal vehicle or travel expenses run through the business, one-time costs like litigation or non-recurring professional fees, and depreciation on assets that won't need near-term replacement. Each add-back needs to be documented and tied to a line item. Undocumented or aggressive add-backs invite price renegotiation during diligence. See our guide on preparing financials to sell a business for how to organize them before going to market.
When should I use SDE vs EBITDA to value my business?
Use SDE if you're an owner-operator earning under roughly $1–2M in total annual compensation from the business. SDE is what most small business buyers use to evaluate owner-operated deals. Use EBITDA if your business has a real management team in place, or if earnings are above $1–2M and you're likely attracting institutional buyers. Near the boundary, run both — they typically converge. If they diverge significantly, it usually means the owner's compensation is far above or below what a market-rate replacement would cost.
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