Question 1

What is the difference between EBITDA and SDE?

Accepted Answer

EBITDA (Earnings Before Interest, Taxes, Depreciation, and Amortization) is a common metric for valuing larger businesses, while SDE (Seller's Discretionary Earnings) is often used for smaller businesses. SDE adds back the owner's salary and other personal benefits to the net income, giving a clearer picture of the total cash flow available to a new owner.

Question 2

How can I make my business less dependent on me?

Accepted Answer

To make your business less dependent on you, focus on creating robust systems and processes for all key operations. Empower your team by delegating responsibilities and providing them with the autonomy to make decisions. A good litmus test is whether you can step away from the business for a month without it negatively impacting performance.

Question 3

Why is it important to sell my business 'on the way up'?

Accepted Answer

Selling your business while it is still experiencing strong growth and has a positive outlook makes it a much more attractive asset to potential buyers. This upward momentum can create a competitive bidding environment, leading to a higher valuation and a more favorable deal structure. Waiting too long to sell can result in a declining business and a significantly lower exit price.