SDE and EBITDA in plain words
SDEis what one full time owner operator takes out of the business in a year: the net profit, plus the owner's salary, plus the personal and one time expenses the business pays for. It answers a simple question: if I buy this business and run it myself, what do I earn? Most businesses that sell for under a few million dollars are priced on SDE.
EBITDA is earnings before interest, taxes, depreciation and amortization, after paying a market salary to whoever runs the business. It answers a different question: what does this business earn for an owner who does not work in it? Groups and private equity buyers think in EBITDA, and larger businesses with managers in place are priced on it.
The two numbers are not interchangeable. A multiple of SDE and a multiple of EBITDA can describe the same price, so always ask which one a quoted multiple is based on.
Why recasting matters
Tax returns are built to lower taxes, not to show what a business earns. Recasting rebuilds the numbers the way a buyer and a lender will read them. We add back your salary and benefits, a car or phone the business pays for, family on payroll who do not work there, one time legal or buildout costs, and interest on debt the buyer will not take on.
Every add back has to be documented. A buyer will accept a clear, supported add back and will discount anything vague, and a lender will fund only what it can verify. Done well, recasting shows the real earnings and holds up in due diligence. Done badly, it produces a number that falls apart after the letter of intent, which is where many deals are lost.
Typical multiple ranges
These are typical ranges we see for medical and wellness businesses in South Florida. They are a starting point for a conversation, not a promise of what your business will sell for.
Med spas, owner operated, SDE under about $500,000
Typically 2 to 3.5 times SDE.
Every business is different, and the final number depends on the recast earnings, the payer mix, the team, the lease and who the buyer is.
Med spas, manager run with more than one location, or EBITDA above about $1 million
Typically 4 to 6 times EBITDA. Larger platforms bought by groups can go higher.
Every business is different, and the final number depends on the recast earnings, the payer mix, the team, the lease and who the buyer is.
Medical practices and clinics, owner operated
Typically 2 to 3 times SDE.
Every business is different, and the final number depends on the recast earnings, the payer mix, the team, the lease and who the buyer is.
Surgical centers with strong utilization
Typically 5 to 8 times EBITDA.
Every business is different, and the final number depends on the recast earnings, the payer mix, the team, the lease and who the buyer is.
What moves the multiple
- How much the business depends on you, your license or your relationships.
- Recurring revenue, such as memberships or repeat patients, and how steady earnings have been.
- The payer mix: cash pay, insurance, or a mix, and the concentration in any one payer.
- A trained team that will stay, and a manager who can run the day to day.
- The lease: the term left, the rent, and whether it can be assigned.
- Clean books that match the tax returns.
- Who the buyer is. A group adding a location can pay differently than a first time owner.
For the med spa details a buyer will check, see selling a med spa. For surgical centers, see selling a surgical center. When you are ready, send the form below and we will come back with questions, then a range and how we got there. To see the whole process, read how to sell a business in Miami.