Thinking about buying a business? Whether it’s your first step into entrepreneurship or your next strategic move, knowing how to compare businesses fairly is essential.
At Sherpa, we make it easy for you to compare and evaluate businesses with clarity. Our AI-powered business sales platform removes the guesswork and delivers insights you can trust—without the need for a business broker.
Why You Need a Standardised View
Every business for sale looks different on paper. Different accounting methods, owner expenses, and structures can make it hard to compare two listings side by side. That’s why Seller’s Discretionary Earnings (SDE) is the key.
SDE gives you a consistent measure of how much money the business actually generates for an owner—regardless of how the books are kept.
What is SDE?
SDE (Seller’s Discretionary Earnings) = Net Profit + Add-Backs
Add-backs typically include:
Owner’s salary
Personal vehicle or travel expenses
Interest payments
Depreciation
One-off costs like rebranding or legal fees
Using SDE helps you understand the real earnings you could take home if you ran the business yourself.
Why Not Just Use Net Profit or EBITDA?
Good question. EBITDA (Earnings Before Interest, Taxes, Depreciation and Amortisation) is great for large businesses or those with multiple shareholders.
But for small businesses—like the ones most people buy and sell on Sherpa—SDE is the standard. It shows what a new owner-operator can expect to earn, giving you a true basis for comparison.
What to Look For When Comparing Listings
Here’s how to compare businesses properly:
✅ Check the SDE
All Sherpa listings include an SDE calculation so you can compare listings on a like-for-like basis.
✅ Understand the multiple
Businesses are typically priced at a multiple of their SDE—often between 1.5x to 3x depending on the size, risk, and industry.
✅ Review revenue quality
Is the income recurring or one-off? Recurring revenue (like subscriptions) usually makes a business more valuable.
✅ Evaluate owner involvement
A business that runs independently of the owner is often worth more and easier to transfer.
Sherpa: Helping You Buy With Confidence
Unlike traditional business brokers who may present vague or inconsistent financials, Sherpa gives you full transparency. Every listing on Sherpa:
Is reviewed using our AI-driven valuation system
Uses standardised SDE for easy comparisons
Includes detailed financial summaries
Is commission-free for both buyer and seller
Whether you're looking to buy a business, compare businesses for sale, or understand what makes a good deal, Sherpa is here to help.
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