SDE recast How a buyer will read the books on this Paris plumbing company
Plumbing businesses recast on service-agreement and drain-cleaning recurrence, not a single hospital rough-in. Add back owner compensation, then remove new-construction spikes, warranty callbacks, and any unlicensed helper coded as a plumber. If the seller still holds the only Illinois plumber license that lets the company pull permits, subtract a licensed plumber-in-charge before the multiple.
Illustration only — not a quote for any Paris shop. A plumbing company whose tax return shows $302,000 of net profit is not worth $302,000 × a rumor multiple.
Add back the owner’s $122,000 W-2 and payroll tax, $10,000 of discretionary benefits, $14,500 of accepted one-time cost, and $7,000 of personal expenses that a buyer will not run. Then subtract $75,000 of replacement labor if the owner still diagnoses, sells, or closes the books.
Adjusted seller’s discretionary earnings are $380,000. At the planning range 3.0x–5.0x, enterprise value is $1,140,000 to $1,900,000. Mid-range 4.00x is $1,520,000 before debt, working capital, holdback, and tax. A Paris buyer will argue the multiple after they ride with the staff and read the lease.
At 4.00 times $380,000 of seller’s discretionary earnings, enterprise value is $1,520,000 before debt, working capital, holdback, and tax. That is the planning conversation. It is not a listing-site guess.
SDE line items
- Reported net profit (tax return, not the marketing P&L)
- + Interest expense
- + Income taxes (not payroll, sales, or property tax)
- + Depreciation and amortization
- + Owner W-2, bonuses, and payroll taxes on the owner
- + Discretionary owner benefits that a buyer will not keep (auto, personal travel, family on payroll with no role)
- + Accepted one-time or non-recurring expenses
- − Market-rate replacement labor for owner work that will not transfer
- = Seller’s Discretionary Earnings (SDE)
Illustration recast for a Paris plumbing company — not a quote | Net profit | $302,000 |
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| Owner W-2 | $122,000 |
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| Benefits | $10,000 |
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| One-time | $14,500 |
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| Personal | $7,000 |
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| Replacement labor (subtract) | −$75,000 |
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| Recast SDE | $380,000 |
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| Planning EV at 4.00x | $1,520,000 |
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