The three acronyms sound alike but answer slightly different questions. Knowing which one a buyer uses helps you present your numbers the way they will read them.
| Measure | What it is | Typically used for |
|---|---|---|
| EBITDA | Earnings before interest, taxes, depreciation and amortization | Businesses with a management team in place |
| EBITA | Earnings before interest, taxes and amortization (depreciation is deducted) | Similar to EBITDA; common for asset-light online businesses |
| SDE | EBITDA plus one owner's full salary and benefits | Smaller, owner-operated businesses |
Why the difference is small for online businesses
Most SaaS, e-commerce and digital services companies own few physical assets, so depreciation is small and EBITDA and EBITA end up nearly identical. Use whichever you already track.
Add-backs: the adjustments that matter
Whatever the measure, buyers look at adjusted earnings. Common add-backs include above-market owner pay, one-time legal or consulting fees, and personal expenses run through the business. Each one should be documented and defensible; unsupported add-backs are the first thing a buyer removes.
Which one Cedar Sky Capital uses
We size businesses on adjusted EBITA, with a range of $600,000 to about $1.2M. If you track EBITDA instead, use that figure in the Buy-Box Checker.