Why Understanding the Numbers Matters!

How to Get the Best Price for Your Business (and Why Understanding the Numbers Matters!

 

If you’re thinking about selling your business, you already know—it’s not just about finding a buyer. It’s about getting the best price and making sure the deal actually works for you.

But here’s the truth most business owners don’t realize:

The biggest confusion in selling a company often comes down to the numbers.

One of the most common mistakes sellers make?

👉 They try to count their distributions as part of the business’s profit—even though they’ve already taken that money out.

Don’t worry, you’re not alone. It happens all the time, and it can really throw off your valuation. So let’s break this down in a way that’s easy to understand.

 

What Are Distributions (and Why You Can’t Count Them Twice)?

 

Distributions are how you, as the owner, take money out of your company—usually from profits after all expenses are paid. They’re common in S-Corps and LLCs and show up on your balance sheet, not your profit and loss (P&L) statement.

Here’s the key:

Distributions aren’t business expenses, and they aren’t part of your business’s operational earnings. They’re your rewardfor already running a profitable business.

So, if you try to add those distributions back into your earnings when calculating the value of your business, you’re double-counting profits.

That can make your business look more profitable on paper than it really is—and that’s something every experienced buyer (and every Tampa Business Broker, Florida Business Broker, or M&A Advisor) will notice right away.

 

Understanding SDE and EBITDA

 

Let’s look at two of the most common ways professionals measure business performance:

1. SDE (Seller’s Discretionary Earnings)

SDE is used primarily for small to mid-sized businesses. It starts with your net profit and adds back things like:

  • Your own salary or compensation

  • Personal expenses run through the business (car, phone, insurance)

  • Interest, taxes, depreciation, and amortization

  • Non-recurring or one-time costs

 

Notice: Distributions don’t belong here either—they’re not expenses. They’re money you already pulled out after profit.

2. EBITDA (Earnings Before Interest, Taxes, Depreciation, and Amortization)

EBITDA is the preferred metric for larger companies or institutional buyers. It focuses purely on operational performance, excluding the financial and accounting decisions.

Once again—no distributions included.

 

A Simple Example

 

Imagine you own a bakery.

You sell all your bread, pay for ingredients, wages, rent, and utilities. What’s left is your profit.

Now you take some of that profit and buy yourself a new bike. That’s your distribution—your personal share of the company’s success.

But when someone asks, “How profitable is your bakery?” you wouldn’t include the bike purchase in your numbers, right?

You’d look at the bakery’s performance—its sales, costs, and profit before you took anything out.

That’s exactly how SDE and EBITDA work. They measure the business’s true earning power, not how the owner spends the profits.

 

Why It Matters When Selling Your Business

 

When it’s time to sell your business, buyers are laser-focused on financial performance. They look at what the company earns—not how much you took home.

If you accidentally inflate your numbers by including distributions, you’ll confuse buyers, lose credibility, and possibly lower your chances of getting the best offer.

A qualified Tampa Business Broker, Florida Business Broker, or M&A Advisor can help you avoid these mistakes, present your financials clearly, and negotiate a deal that reflects your business’s true value.

 

Want to Know What Your Business Might Be Worth?

 

Check out this quick resource to get a general idea:

👉 What Is a Business Worth?

 

Looking to Buy or Sell a Business? Start Here:

 

 

 

Bottom Line

 

Understanding the difference between SDE, EBITDA, and distributions isn’t just financial trivia—it’s the foundation of how to get the best price for your business.

So before you meet that next buyer, make sure your numbers tell the real story—and get help from professionals who know how to protect your value, your deal, and your peace of mind.