22 Aug 2025 2 min read Price Yourself Paid

Why Profitability Isn't Optional — Even If You're Not Selling

Whether you plan to sell your product business or run it forever, SDE — Seller's Discretionary Earnings — is the number that tells you whether you're building real value or just staying busy.

Let's talk about SDE — Seller's Discretionary Earnings. In plain English: it's the measure of how much money the owner of a business actually takes home in salary, perks, and profit after all expenses. It's the number that tells you what your business is really worth to you — or to a future buyer.

I bring this up because I see too many founders who chase top-line revenue and neglect profitability. Whether you're building toward an eventual exit or running your business as your forever lifestyle company, profitability isn't optional. It's oxygen.

If you want to sell someday

When a buyer looks at your business, they don't care about your gross revenue — they care about SDE or EBITDA. SDE is the appropriate measure for owner-operated companies with revenues under $5 million. EBITDA (Earnings Before Interest, Taxes, Depreciation, and Amortization) is more appropriate for larger, management-run businesses over $5 million in revenue.

A $125K SDE means a buyer could expect to earn about $125K annually from running your business. That figure, multiplied by 2x, 3x, or 4x depending on risk and growth potential, becomes your valuation.

If you're running break-even just to grow revenue, or minimising taxes at the expense of profitability, your SDE is zero. Zero times any multiple is still zero.

There's meaningful evidence that over 86% of small business owners pay themselves under $100K year after year — and many take nothing at all. That included me, before I started running the company with owner's pay and profit as an explicit intention, with separate bank accounts, rather than as an afterthought that popped out after all the bills were paid.

If you're keeping it as a lifestyle company

Not planning to sell? Then SDE is still your North Star. It represents the true benefit you and your family get from the business — your paycheck, your ability to invest and save, your ability to not stress at night.

If your business can't generate meaningful SDE, you don't have a business. You have a stressful, unpaid hobby.

Why this matters right now

We're in a season where a lot of founders are distracted by revenue milestones, social media follower counts, or raising money. But profitability buys you options.

Want to scale? Profit funds your next move. Want to sell? Buyers only pay multiples of profit and owner's pay. Want to keep it forever? Profit and owner's pay is the reward for the risk you're taking.