Worksheet 02 · Earnings

SDE and EBITDA calculator, 2026.

This sheet converts net income per books into seller’s discretionary earnings and adjusted EBITDA. SDE is the total return to one working owner. Adjusted EBITDA is what is left after paying a market salary to a replacement. Individual buyers use SDE. Larger buyers use EBITDA.

Enter last year’s figures. Replacement pay uses the 2026 Robert Half range for Los Angeles. Schedule B below shows how buyers usually treat each add-back.

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Practice earnings worksheet Sheet 02 · Rev. 2026-09
A Starting point Last fiscal year
Fees collected, not billed.
$
Schedule C line 31, or ordinary business income on the K-1. After any owner salary already expensed.
$
B Owner add-backs
W-2 wages or partner guaranteed payments already deducted above. Sole proprietors enter zero.
$
Employer FICA, health insurance, disability, retirement match on your own salary.
$
SEP, profit-share, or defined-benefit contributions for the owner.
$
Auto, travel, meals, phone, memberships, family insurance. Documented items only.
$
Only the amount above what the role would cost to fill.
$
C Financing, non-cash, and one-time items
Lines of credit, equipment loans, a prior acquisition note.
$
Including amortization of purchased client lists.
$
Legal, a software conversion, a bad-debt write-off, a move. Not present in the two prior years.
$
Positive if you pay yourself above-market rent. Negative if you occupy your own building below market.
$
D Replacement salary
Market pay for a CPA to run the practice, plus payroll taxes and benefits. Los Angeles tax manager range: $144,100 to $193,225 (Robert Half, 2026).
$
Seller’s discretionary earnings

$0

0% of collections

Adjusted EBITDA, after replacement compensation

$0

0% of collections

Implied value
1.0x gross fees$0
SDE × 1.61 to 2.66 (sold-deal quartiles)$0
SDE × 2.04 (median)$0
EBITDA × 3.0 to 4.5 (under $1M EBITDA)$0

When the three methods disagree, buyers usually start from the lowest one. A documented add-back schedule shortens diligence.

Items buyers usually question
    Book a confidential call Value by service line
    Schedule B · How buyers treat each line
    LineAmountTreatment
    How the sheet works

    SDE

    SDE assumes one working owner receives all profit, salary, benefits, and personal expenses run through the practice. Individual buyers and the sold-deal databases use it. Accounting and tax practices sold in 2021 to 2025 changed hands at a median 2.04 times SDE. The middle half of deals ranged from 1.61 to 2.66.

    Adjusted EBITDA

    A buyer that hires a CPA to run the practice deducts a market salary first. Below $1M of EBITDA, published multiples run 3 to 4.5 times. If little EBITDA remains after the deduction, buyers price on gross fees and SDE instead.

    Add-backs

    Owner salary and payroll taxes are accepted without discussion. Personal expenses need documentation. One-time items are checked against the two prior years. Items that recur are treated as normal expenses.

    Sources and assumptions

    Published sources

    1. BizBuySell, Accounting & Tax Practice Valuation Multiples & Financial Benchmarks (sold deals, 2021 to 2025). Median 2.04x SDE, interquartile 1.61 to 2.66x. Median owner-earnings margin 56.1% of revenue. Median revenue multiple 1.02x.
    2. CT Acquisitions, Accounting Firm Business Valuation (updated June 2026). 3 to 4.5x EBITDA for practices under $1M of EBITDA. 4.5 to 5.5x at $1M to $3M.
    3. Accounting Practice Sales, One Times Gross: Is That the Law? Service businesses at 1.5 to 2 times owner cash flow.
    4. Robert Half, 2026 Salary Guide, Tax Manager, Los Angeles: $144,100 to $193,225 before payroll taxes and benefits.

    Calculation

    • SDE = net income per books + owner salary or guaranteed payments + payroll taxes and benefits on the owner + owner retirement contributions + personal expenses + family excess + interest + depreciation and amortization + one-time items + rent adjustment.
    • Adjusted EBITDA = SDE minus replacement compensation, fully loaded. Working capital, capital expenditures, and a second working owner are not modeled. A two-partner practice needs two replacement salaries.
    • Implied values apply the published multiples without adjustment for size, concentration, service mix, or terms. Worksheet 01 covers those.
    • This is an estimate. It is not an appraisal, an offer, or tax advice.
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