Owners come to me with a number in mind, usually drawn from net profit or from whatever the accountant reports for tax purposes. Almost none of them are pricing from SDE, and almost every buyer in this market is. The gap between those two numbers is where most of the disagreement in a first conversation comes from, and it is entirely avoidable once you understand what SDE actually measures.
What SDE actually is
Seller's discretionary earnings is the total economic benefit a single owner-operator gets from the business in a year, before financing costs, tax, non-cash charges, and anything that is really a personal expense rather than a cost of running the business. It is not net profit, and it is not EBITDA either. Net profit already has the owner's own compensation and personal spending baked in or stripped out inconsistently, depending on how the books are kept, so it tells a buyer very little on its own. EBITDA assumes a market-rate management team is already running the business day to day, which is a reasonable assumption for a large company and a poor one for most of the AED 2 to 10 million businesses I work with, where the owner is still the general manager, the top salesperson, and the person who answers the phone.
SDE exists to answer one question cleanly: if a new owner stepped in tomorrow and ran this business the way the current owner does, what would it actually generate before that new owner is paid for their own time. That is the figure the 2.0 to 3.5 times multiple gets applied to, and it is the figure a buyer's advisor will rebuild from your financials whether or not you present it to them yourself.
What gets added back and what does not
The add-back process is where most disagreements happen, because owners and buyers each have an incentive to draw the line in a different place. The rule that actually holds up is simple: an item adds back if a new owner would not have to bear that specific cost, and it does not add back if a new owner would.
Adds back cleanly
- The owner's own salary, drawings, or profit distributions taken in place of a salary.
- A personal vehicle, phone plan, or insurance policy run through the company for the owner alone.
- One-time, non-recurring costs: a lawsuit settled last year, a relocation, a one-off consultant engagement.
- Non-cash charges, chiefly depreciation and amortization.
- Interest on debt tied to the owner personally that a buyer will not assume.
Does not add back
- A second owner-operator's or a manager's market-rate salary, if that person stays on after the sale.
- Real operating costs the business keeps paying regardless of who owns it: rent, staff wages under WPS, cost of goods sold.
- Cash sales that never appear on a VAT return or a bank statement. If it cannot be verified against the truth triangle, it does not exist for pricing purposes, however real the owner insists it is.
- The market-rate cost of replacing work the owner does personally, if that work is genuinely required to keep the business running. This becomes a deduction from SDE, not an item you simply leave out.
Two gray zones that decide real negotiations
Most add-backs are not actually disputed. A vehicle used only by the owner, a lawsuit settled once, straightforward depreciation, these get accepted quickly by both sides. The real negotiation happens in a smaller number of gray areas, and knowing how a buyer's advisor treats them before you sit down saves a great deal of back and forth later.
The first is family on payroll. A spouse or adult child listed as an employee reads very differently depending on whether that person actually shows up and does real work at a below-market rate, in which case a buyer may add back the gap between what they are paid and what the role costs on the open market, or whether the role is largely nominal, in which case the entire salary is a genuine add-back because the position disappears with the sale. Sellers who cannot describe what that person actually does day to day tend to lose this argument, because the burden of proof sits with the party claiming the add-back.
The second is mixed personal and business use, a vehicle, a phone plan, occasional travel, that is not purely one or the other. Buyers generally accept a reasonable estimate here rather than demanding a receipt-by-receipt breakdown, but the estimate has to be defensible against how the expense actually appears in the accounts. Claiming that a fully personal family holiday charged to the company was really a business development trip does not survive a buyer's advisor reading the same invoice, and pushing an indefensible add-back tends to cost more in credibility than the add-back itself was ever worth.
A worked example, in dirhams
Take a business reporting net profit before tax of AED 310,000. The owner draws a salary of AED 480,000 through payroll, runs a personal vehicle and insurance through the company at AED 38,000 a year, settled a one-time lease dispute last year for AED 22,000, and the accounts carry AED 65,000 of depreciation, a non-cash charge. The owner also personally manages daily operations, work a buyer would need to replace with an operations manager at roughly AED 150,000 a year.
Apply the 2.0 to 3.5 multiple to that SDE and the price range runs from AED 1.53 million to AED 2.68 million. Run the same SDE through the buyer-yield test at 25 to 35 percent and the ceiling runs from roughly AED 2.19 million, for a buyer demanding a 35 percent cash return, up to AED 3.06 million for one accepting 25 percent. A buyer who insists on the stricter return will not go past about AED 2.19 million, whatever the multiple math suggests at the top end, which is what actually caps this particular negotiation below AED 2.68 million.
Why buyers anchor on SDE and not net profit or EBITDA
Most UAE SMEs in the AED 2 to 10 million range are owner-run, not professionally managed, so EBITDA understates what it would actually cost to operate the business without the owner in it, and raw net profit is distorted by whatever the owner happens to draw and whatever personal costs sit inside the company's expenses. SDE normalizes both distortions at once. It answers the buyer's real question, what does this business generate for an owner-operator who runs it the way the seller does, and it is the only one of the three figures built specifically for a business this size and this ownership structure.
This also changes how a seller should walk into the first real conversation. An owner who leads with net profit is negotiating from a number the buyer has already discarded before the call starts, and every minute spent defending that figure is a minute not spent on the number that actually decides the price. An owner who leads with a properly built SDE, add-backs documented and defensible, is negotiating on the same ground the buyer's advisor will land on anyway, just earlier and on terms the seller had time to prepare.
Every add-back needs a paper trail a buyer's advisor can check against the truth triangle, VAT returns crossed with bank statements crossed with payroll. An add-back with no support does not quietly stay in the number. It gets removed during diligence, after the buyer has already anchored on a higher figure, and the negotiation that follows is worse than if the number had been right from the start. Present a defensible SDE on day one and there is far less room for a buyer to chip away at it later.
Where this leaves you
SDE is not a trick or a way to flatter your numbers. It is the specific lens a buyer already uses, whether or not you present your own figures through it, so doing the work yourself before a conversation starts puts you in a stronger position than waiting for a buyer's advisor to do it for you and present you with their version. For the full method behind the multiple, read the guide to business valuation in the UAE, and for how this plays out across a wider range of sectors, see what UAE buyers actually pay for SMEs in 2026.
I do this work through Coello Advisory. Send five numbers on WhatsApp, sector, size, rough profit, and what stage of thinking you are at, or message me directly. A written valuation read, built from your own figures, turns around in 48 to 72 hours.