Seller discretionary earnings
SDE is commonly used to discuss the economic benefit available to one active owner. Depending on the convention and purpose, it may reflect the owner’s compensation and certain discretionary items. The calculation should state its definition and show the source and support for every adjustment.
EBITDA
EBITDA refers to earnings before interest, taxes, depreciation, and amortization. It is an operating earnings measure, not a measure of cash flow and not a substitute for understanding working capital, capital expenditures, debt, or taxes.
Why the distinction matters
A company that needs a full-time owner-operator may be analyzed differently from one with a management team and market-rate leadership costs. Comparing SDE in one business with EBITDA in another without a clear bridge can distort the picture.
Keep the measure tied to the purpose
Ask your CPA or qualified transaction adviser which earnings measure is useful, what normalization was applied, and whether the measure reflects a sustainable operating model. This overview is educational, not accounting advice.