Professional Transition Strategies
Professional Transition Strategies
PTS wants to help you every step of the way. Whether you're selling, buying, leasing or expanding your dental clinic, PTS is here to provide the information, answers and expertise you need. Check back weekly for our most recent blog posts!
Professional Transition Strategies

Delving into Seller's Discretionary Earnings (SDE)

2/27/2024 9:37:15 PM   |   Comments: 0   |   Views: 90
Seller's discretionary earnings (SDE) are a crucial but often misunderstood aspect of dental practice transactions. In this blog, Jennifer Sims, a CPA at PTS, sheds light on this vital metric and its significance in the buying and selling process.

Understanding SDE: What Sellers & Buyers Need to Know

For sellers, comprehending SDE is essential when putting their dental practice on the market. SDE represents the total financial benefits available to a single owner-operator, encompassing profits, perks, personal expenses covered by the practice, and tax advantages utilized. It provides sellers with a comprehensive view of their practice's profitability, allowing them to showcase its true earning potential to potential buyers.

From the buyer's perspective, SDE offers insight into the actual income they can expect as the new practice owner. Unlike EBITDA, which is more common in private equity or DSO acquisitions, SDE provides a tailored view of earning potential for individual buyers. It considers both traditional financial metrics and discretionary expenses, enabling buyers to make informed decisions and accurately assess the value of the practice.

Addressing Common Questions on SDE

Frequently asked questions about SDE include inquiries about the expenses included, its difference from EBITDA, and the importance of professional guidance. SDE encompasses all expenses necessary for practice operation, differs from EBITDA by considering discretionary expenses, and benefits from professional guidance to ensure accuracy and efficacy in the valuation process.

The Bottom Line

SDE plays a pivotal role in dental practice sales, offering transparency for sellers and insight for buyers. Understanding and leveraging SDE are essential for successful practice transitions, providing clarity and confidence throughout the process. For expert guidance on navigating SDE and maximizing your practice's potential, contact Professional Transition Strategies.
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