Almost every small business for sale under a few million dollars is priced as a multiple of SDE. If you're evaluating an HVAC, plumbing, or electrical business, this is the number to understand first — before revenue, before the equipment list, before anything else.
What is SDE?
Seller's discretionary earnings (SDE) is the total financial benefit a single full-time owner-operator gets from the business in a year. Start with net profit, then add back:
- The owner's salary (since a buyer will pay themselves differently)
- Interest, taxes, depreciation, and amortization
- One-time or non-recurring expenses
- Personal expenses run through the business (a vehicle, a phone, travel)
The result is a cash-flow number that represents what an owner-operator actually takes home before financing costs — the figure buyers and lenders use to evaluate whether a deal pencils.
What is an SDE multiple?
The SDE multiple is simply: asking price ÷ SDE. If a business asks $600,000 and has $200,000 in SDE, that's a 3.0x multiple. Multiples for HVAC service businesses typically cluster in the 2x–4x range for owner-operator-sized deals, moving higher for larger, more systemized operations with management in place, and lower for smaller, more owner-dependent shops.
A residential HVAC business asks $450,000 with $180,000 in SDE — a 2.5x multiple. At 12.5% down, that's a $56,250 down payment financing roughly $393,750 through an SBA 7(a) loan.
Why the multiple moves
The same SDE can support different multiples depending on:
- Revenue mix. Recurring service-contract and maintenance revenue commands a premium over one-off installs.
- Owner dependence. A business that runs without the owner on every job is worth more than one where the owner is the business.
- Customer concentration. Heavy reliance on a handful of commercial accounts is a discount factor.
- Equipment and fleet condition. Trucks and tools nearing replacement age effectively reduce the real multiple you're paying.
The multiple tells you what you're paying relative to cash flow — it doesn't tell you whether that cash flow will actually cover an SBA loan payment. That's a separate question, and it's the one that actually determines whether a lender will fund the deal. See our DSCR guide for that math.
Every listing on Bizvetting shows its SDE multiple up front — banded, graded, and run through the same underwriting math as every other deal in the current batch.
See graded HVAC businesses →