Glossary

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Seller’s Discretionary Cash (SDC)

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Seller’s Discretionary Cash (SDC) represents the total financial benefits available to a business owner, including pre-tax profits, owner’s salary, and discretionary expenses. In the context of business valuation, SDC provides a comprehensive picture of a business’s earning potential by considering the owner’s perks and non-essential expenses that might not be incurred by a new owner. This metric aids in estimating the true cash flow generated by the business and is particularly relevant for small businesses or those with a significant owner-operator influence. SDC is crucial in determining the business’s market value and attractiveness to potential buyers. In contrast with Seller’s Discretionary Earnings (SDE), SDC tends to focus more on actual cash flow rather than a broader calculation of earnings involved on SDE.

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