When a buyer sits across from a landscape company owner and starts talking about valuation, there are two metrics that come up: SDE and EBITDA. Most operators don’t know the difference. Some don’t know either exists. That gap can be worth hundreds of thousands of dollars when a deal closes — or falls apart.
This post explains what each metric is, how they’re calculated, which type of buyer uses which one, and why it matters if you’re planning a sale in the next 3–5 years.
What Is SDE?
SDE stands for Seller’s Discretionary Earnings. It’s the metric most commonly used to value small businesses — typically companies under $3M in revenue — when the buyer is an individual operator or an SBA-backed acquirer who plans to run the business themselves.
The formula is: Net Profit + Owner’s Salary + Personal Benefits + Non-Cash Charges + Non-Recurring Expenses = SDE
The key distinction is that SDE adds back the owner’s full compensation — because the buyer, who is also going to run the business, will receive that compensation instead of paying it out. In a landscape company where the owner is pulling $180K in salary and benefits, that entire amount gets added back to the earnings base before applying a multiple.
What Is EBITDA?
EBITDA stands for Earnings Before Interest, Taxes, Depreciation, and Amortization. It’s the metric used by private equity firms, strategic acquirers, and sophisticated buyers who will install a management team to run the business rather than operate it themselves.
EBITDA does not add back the owner’s salary in full. Instead, it normalizes the owner’s compensation to a market-rate replacement cost. If you’re paying yourself $180K but a competent GM in your market would cost $110K, EBITDA adds back the $70K difference (the "excess compensation") — not the full $180K.
EBITDA tells a buyer what the business earns assuming it’s run by a professional management team. SDE tells a buyer what the business produces for an owner-operator. They’re both correct — they just answer different questions.
A Real-Numbers Example
Let’s use a hypothetical $3.5M landscape company. The owner pays himself $200K. Net profit after all expenses is $180K. Non-cash depreciation is $60K. Non-recurring equipment repair last year was $25K.
Same business. $115K difference in the earnings base. At a 3.5× multiple, that’s a $402,500 difference in enterprise value — depending on which metric your buyer uses.
Which Buyer Uses Which Metric?
Individual buyers and SBA lenders typically use SDE with a multiple of 2.5–4×. Private equity and strategic acquirers (another landscape company buying yours) typically use EBITDA with a multiple of 3–6×. The type of buyer you target shapes both the metric and the multiple — and therefore the deal structure you should prepare for.
For most landscape companies in the $2M–$8M range, the realistic buyer pool is a mix of both. A company with strong recurring maintenance revenue, clean financials, and documented systems becomes attractive to strategic buyers — which opens the door to EBITDA-based valuations and higher multiples, even if the absolute SDE number is lower.
What This Means for Exit Preparation
Understanding which metric applies to your likely buyer pool is step one. Step two is making sure your financials are presented correctly for that metric — which means documenting add-backs, normalizing your compensation, and separating personal expenses from business expenses before a buyer’s accountant does it for you.
Most owners who haven’t done this work walk into a deal with an undocumented P&L and a buyer who discovers issues in due diligence. That’s where deals re-trade or fall apart — not because the business wasn’t good, but because the financials weren’t presented in a way that supported the ask.
The Exit Readiness engagement at GCG starts with this analysis. We look at your current earnings base, identify which buyer type is most likely given your revenue mix, and help you build the financial presentation that supports the valuation you’re targeting.
Frequently Asked Questions
What is the difference between SDE and EBITDA for landscape companies?
SDE (Seller's Discretionary Earnings) adds back the owner's full compensation and personal expenses to net income, making it the appropriate valuation metric for owner-operated landscape businesses where the owner is active in the business. EBITDA (Earnings Before Interest, Taxes, Depreciation, and Amortization) does not add back owner compensation beyond a market-rate management salary, making it the appropriate metric for larger landscape operations with professional management. Which metric a buyer applies can produce a difference of hundreds of thousands of dollars in the final valuation.
Which metric do buyers use to value landscape maintenance companies?
Buyers generally use SDE for landscape maintenance businesses with revenues under $2 to $3 million where the owner is the primary operator. They shift to EBITDA as the business grows and management becomes more professional. Strategic buyers and private equity acquirers almost always use EBITDA. Understanding which metric applies to your business — before you enter a sale process — is essential to evaluating any offer accurately.
What EBITDA multiple should a landscape maintenance company expect?
Landscape maintenance companies have transacted at 4 to 6 times EBITDA in recent years, with variation based on revenue concentration, renewal rate, geographic market, service mix, and management depth. Companies with strong recurring book metrics, documented enhancement penetration, and clean financial reporting command the higher end of the range.
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