$
Total revenue collected before deductions
%
Total expenses ÷ collections × 100
SDE = Owner's Compensation + Non-business Add-backs + Net Income. This represents total economic benefit to the owner-operator.
$
Owner's comp + non-business add-backs + net income
Adjusted EBITDA normalizes owner compensation to a market replacement rate, then adds back net income and non-recurring expenses. This is the primary metric used to determine EBITDA-based multiples for strategic and PE buyers.
$
Net income + add-backs − normalized comp adjustment
Tip: Adjusted EBITDA is calculated by normalizing owner pay to a market rate, then adding back net income and non-recurring items. For a medspa, the market replacement rate for the owner/NP is typically ~18% of collections. For plastic surgery, use ~35% for the lead surgeon. If unsure, enter your best estimate — our broker can refine it during a consultation.