Calculate Seller's Discretionary Earnings for a SaaS or online business, plus a fair value range at 2.5×–4× SDE. This is the profit line acquirers under $5M revenue underwrite deals against.
Indie SaaS typically trades 2.5×–4× SDE. Growth and low churn push toward the top of the band; concentration risk and rising churn pull toward the bottom.
SDE assumes one full-time owner-operator. That's why it adds back the owner's salary, benefits, and personal expenses — a new owner steps in and pockets that money instead of paying it out. Buyers pay a lower multiple on EBITDA (which doesn't add back owner comp) precisely because EBITDA already assumes a hired operator.
For SaaS specifically, COGS is thin — hosting, payment fees, third-party APIs. Most of the profit line is opex discipline: how much of the founder's time goes into the business, and whether any of that becomes a real hire post-acquisition.
A common trap: sellers list expenses as "one-time" that repeat every year in disguise (a "rebrand" that happens biennially, "one-time" contractor projects that are ongoing). Real one-time expenses have a clear reason they won't recur — a lawsuit settled, a trademark filed, a platform migration completed.
TrustMRR-verified SaaS and apps, sorted by our estimate of annual net profit (MRR × margin × 12). Use these as reference points for the SDE multiples you're evaluating.
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SDE is the total financial benefit a full-time owner-operator receives from a business in one year. It's net profit plus owner's salary, plus non-cash and one-time expenses, plus any personal expenses run through the business. It's the standard profit line for valuing owner-operated businesses under roughly $5M in revenue.
SDE = Revenue − COGS − Operating expenses + Owner's salary + Owner benefits + Depreciation + Amortization + One-time expenses + Discretionary expenses. For a SaaS, COGS is usually just hosting, payment fees, and third-party APIs.
EBITDA doesn't add back owner comp. For a single-owner SaaS, EBITDA underreports the buyer's actual take-home because it assumes you'd hire someone to do the owner's job. SDE assumes you'd do it yourself.
Indie SaaS under $500k SDE: 2.5×–4× SDE, with the top of the band reserved for high-retention, low-churn businesses. Above $1M SDE, buyers usually shift to EBITDA multiples.
Legitimate add-backs are non-cash (depreciation), one-time (a rebrand, legal settlement), or discretionary owner expenses (owner car lease, personal travel). Anything a new owner would still have to pay is not an add-back.
Cross-reference the seller's SDE against bank statements, Stripe/Paddle payout reports, and expense receipts. On Startup Index, MRR is verified live via TrustMRR — you still verify expenses in diligence.