Valuation · SDE multiples
Cleaning business SDE multiples, and how to calculate your SDE
Almost every cleaning business under a few million in revenue is priced as a multiple of seller’s discretionary earnings. Get the SDE wrong and the multiple does not matter.
What SDE is
SDE is the total cash benefit one full-time owner takes out of the business in a year. Start with net profit from your tax return or profit and loss statement, then add back the items a new owner would not inherit:
- Owner’s salary and payroll taxes. Everything the business pays you as wages, plus the employer taxes on it.
- Owner benefits. Health insurance, retirement contributions and similar perks paid for the owner.
- Personal expenses run through the business. A personal vehicle, phone, travel or meals that are not needed to run the company.
- Interest. Loan interest, because a buyer will finance the business their own way.
- Depreciation and amortization. Non-cash charges. Buyers look at real equipment replacement separately.
- One-time costs. A lawsuit, a move, a one-off repair. Only genuinely non-recurring items; buyers check.
If you employ a manager who would have to be replaced, their salary stays in as a cost. If you have two owners drawing pay, only one owner’s compensation is added back; the second is a job a buyer would have to fill.
From SDE to price
Price is SDE times a multiple. The median listed cleaning business reports about $113K of SDE and asks 2.84×, which puts it around $321K. The multiple itself depends mostly on size, then on contracts, owner dependence and how clean the books are.
Multiples by SDE band
Active listings with a reported asking price and cash flow. Bands under 8 listings show no median.
| SDE band | Listings | Lower | Median | Upper | Median asking |
|---|---|---|---|---|---|
| Under $75K | 87 | 2.11× | 3.00× | 4.15× | $140K |
| $75K - $150K | 98 | 1.77× | 2.42× | 3.57× | $261K |
| $150K - $300K | 65 | 2.10× | 2.78× | 3.13× | $525K |
| $300K - $500K | 25 | 2.71× | 3.47× | 4.00× | $1.2M |
| $500K+ | 17 | 3.02× | 4.00× | 4.67× | $2.5M |
Run your own number on the valuation calculator, or see multiples for residential and commercial & janitorial businesses.
Mistakes that cost sellers money
Adding back things a buyer will still pay for. If the work still has to be done after you leave, it is a cost, not an add-back. Buyers and lenders remove these during diligence and the price drops with them.
Unrecorded cash. Revenue that never reached the tax return cannot be verified or financed, so it adds nothing to what a buyer can pay.
Using a partial year. Buyers price on trailing twelve months and the last two to three years of returns. A strong quarter does not reset the number.
Not sure what your real SDE is?
Send us your last two years of returns and a current profit and loss statement. We will recast the SDE the way a buyer will.