This week's business is a industrial services company in Cincinnati that reports two different profit numbers, and the space between them is the whole lesson.

Same business, same year. And SDE is nearly double EBITDA. That gap isn't an accounting quirk to gloss over. It's the single clearest measure of how much of this "business" is really a job and it quietly decides who will buy you and what they'll pay.

If you've ever wondered whether you own an asset or just a well-paying job, this is exactly how a buyer figures that out about you.

The Listing

Lesson 1: The gap between SDE and EBITDA is a measure of how much of your cash flow is really your labor.

Quick refresher. EBITDA is what the business earns after paying a market wage for everyone's work, including a manager to do the owner's job. SDE takes that number and adds the owner's pay and perks back on top, because it assumes a single owner-operator will step in and do that work themselves.

So the difference between them — SDE minus EBITDA — is essentially what the owner's own labor is worth. Here that gap is about $155,000, which is nearly half of the total SDE.

Translation: roughly half of this business's "cash flow" isn't investment profit at all. It's wages, the money the owner earns for doing the day-to-day work. That's not a criticism; plenty of great businesses run this way. But it's a fact that shapes everything about the sale.

Your move: know your own gap. A small gap (SDE ≈ EBITDA) means your business runs on other people and throws off a real investor's return. A large gap (SDE far above EBITDA) means you've largely bought yourself a job. Neither is wrong to operate but they sell to different buyers, at different prices.

Lesson 2: The size of that gap decides who your buyer is and which multiple applies.

There are two kinds of buyers, and they value your business off two different numbers:

See what the gap did? A large SDE-to-EBITDA gap shrinks your buyer pool down to owner-operators and makes the business look overpriced to everyone else. The bigger the gap, the fewer the buyers and the more the price depends on finding someone who wants that exact job.

Your move: if you want the widest, deepest, best-paying buyer pool, one that includes investors and strategic acquirers, not just owner-operators — shrink the gap. Build a business that still earns a real profit after you've paid someone a full market wage to do your job. That single shift is what turns "a job you happen to own" into "an asset investors will compete for."

One quick question for this week's Owner Pulse:

(One click, anonymous — it helps us tailor what we send you.)

Lesson 3: A thin EBITDA in an asset-heavy business is a warning worth heeding.

Look closer at that $178K EBITDA, it's only about 11% of revenue, which is modest. And this is an asset-heavy operation: there's roughly $640K of hard assets in the price, including four mobile service units and a shop truck.

Those vehicles wear out and must be replaced. After you set aside the real cost of keeping that fleet current, the sustainable EBITDA gets thinner still. So the true passive, investable return here is even smaller than $178K suggests, a big owner-labor add-back sitting on top of a thin, capital-intensive base.

Your move: in an asset-heavy business, your EBITDA already has to absorb equipment replacement, so a thin EBITDA plus a large owner-labor add-back means the genuinely passive return is small, and investors will see it instantly. If you want investor-grade value, you have to grow EBITDA, not just SDE.

Lesson 4: What's genuinely strong here.

Credit where it's due. Twenty-four years in business. Mission-critical B2B service "where operational downtime creates significant cost implications for clients" — that's real, sticky demand, because customers can't afford to skip it. Recurring revenue and high retention. That durability is legitimate and valuable.

And it's a franchise, which actually helps in this specific case. The franchisor's training lets a new owner-operator step into the role the current owner is vacating, which matters when the owner is exiting for health reasons and the business leans heavily on that owner. Just remember the franchise trade-offs we've covered before: you're buying into someone else's system, with its own fees and rules attached.

Found the right hire, but no entity in their country? Remote becomes the legal employer — with contracts, benefits, and tax setup handled, plus direct access to the same in-house team that runs payroll locally.

See how it works

The through-line.

Two numbers, one business, nearly double apart and the space between them is the truth about what's really for sale. If most of your "profit" is the wage you pay yourself for showing up, you don't yet own an asset. You own a well-paying job.

That's a perfectly good thing to run. But at sale time it limits you to buyers who want that same job, at a price that reflects it. The businesses that command the highest prices and attract the widest field of buyers are the ones with real profit left over after the owner has been fully replaced.

Close the gap between your SDE and your EBITDA, and you convert a job into an asset. That's the work and it's worth starting years before you'd ever list.

To your future exit,

Andrew
Unlock Your Exit