SDE = Net profit + owner's salary + owner's perks + add-backs (non-recurring, personal expenses). Use the normalized, recast number — not raw net income.
Not sure of SDE? Read our SDE guide
Most BC small businesses (under $5M) are valued on an earnings multiple basis. The base metric is SDE — the total economic benefit to a full-time owner-operator. This includes net profit, the owner's salary and benefits, and legitimate add-backs (non-recurring expenses, personal expenses run through the business, depreciation, etc.).
The multiple is then applied based on industry norms, the quality of the business, lease security, transferability, and current market demand. A restaurant with predictable revenue, a long lease, and strong management trades at a higher multiple than one with one-year lease and absentee owner.