Business For Sale & Franchise Search Engine  
   
My Account
Search Businesses For Sale
Location:

Category:

to refine your search results use advanced search  
Franchise Opportunities

Sell Your Business, Starting at $20.99 per month
Small Business Resources > What is Seller's Discretionary Cash Flow?

What is Seller's Discretionary Cash Flow?

Definition of:   Seller's Discretionary Cash Flow or Owner's Discretionary Cash Flow

Seller's Discretionary Cash Flow is a very important term you must know if you're looking at a small business to buy. Depreciation, amortization and interest paid by the business are items that are discretionary and generally "added back" to the bottom line of the business. Also, many, if not most, small business people pay lots of bills out of their businesses because they are deductible to the business but not to the individual. The owner may buy or lease a car or pay country club dues or use cell phones or many other things that are purely discretionary to the owner. A buyer may or may not choose to pay the same items. So, take the cash flow or profit off the bottom line of the profit & loss statement or tax return and add back items such as depreciation, interest paid, and the discretionary items mentioned above and you have Seller's Discretionary Cash Flow (also known as Owner's Discretionary Cash Flow), the MOST important number a small business buyer needs to know.

How to calculate Seller's Discretionary Cash Flow
Seller's Discretionary Cash Flow or SDCF is a common Cash Flow based measure of business earnings for owner-operator managed businesses. According to the International Business Brokers Association, SDCF can be determined as follows:

Start with the business pretax earnings.

  • Add non-operating expenses and subtract non-operating income.
  • Add unusual or one-time expenses, subtract non-recurring income.
  • Add depreciation and amortization expenses.
  • Add interest expense, subtract interest income.
  • Add a single owner's total compensation.
  • Adjust compensation of all other business owners to market value.


About the Author











Related Resources
Selling a Business
12 Laws of the Business Buying and Selling Jungle - PART I
12 Laws of the Business Buying and Selling Jungle - PART II
3 Reasons To Sell Your Business Now For Maximum Profit
8 Key Steps to Selling Your Business
A Simple Formula For Increasing The Value Of Your Business
Are Business Brokers Licensed?
Auto Franchises
Build Business Value – Before Selling A Business
Business Brokers
Business Lawyer
Businesses for Sale by Owner
C-Corp Asset vs Stock Sale Dilemma
Capital Gains Deferral in a Business Sale
Closing The Deal
Coffee Franchises
Due Diligence - Not As Scary As It Sounds
Financing The Deal
Food Franchises
Franchise Information
Franchise Reviews
Free Small Business Magazines
Great Reasons to Sell Your Business and How to Do It Right
House Cleaning Franchises
How Much is My Business Worth?
How Not to Sell Your Business
How to Sell a Business Online
How to Sell a Small Business
How to Sell Your Business
How To Value A Business
Hurricanes Affect the Value of Florida Businesses
Important Tips When Selling a Business
Preparing a Business for Sale
Protect The Merger Or Sale Value Of Your Business: What You Can Learn From The DaimlerChrysler Deba
Role of Business Brokers in Selling a Business
Run Your Business Like You Have To Sell It
Sell a Business
Sell a Franchise
Sell My Family Business - Deciding to Sell the Family Business
Selling A Business - The Eleventh Hour Contract Change
Selling a Retail Business – How to Sell a Retail Business
Selling a Troubled Business
Selling Your Business - A Tool To Reduce Capital Gains Taxes
Selling Your Business - Prepare for the Buyer Visit
Selling Your Business - Should It Be a Do It Yourself Job?
Selling Your Business - Ten Steps to Increase Selling Price
Selling Your Business - Tips to Selling Your Business
Selling Your Business - What Would Sam Zell Do?
Selling Your Business - Why Use a Business Broker
Selling Your Technology Company - Why Earn Outs Make Sense Today
Should I Use a Business Broker to Sell My Business?
Should I Use a Business Broker to Sell My Business?
Small Business Debt Relief
Tax Tips on a C Corp Asset Sale
The Many Different Deal Structures When Selling a Business
The Pricing Dynamics of Selling a Business
The Ten Commandments of Selling My Business
To Sell a Business or Not Sell a Business A Crossroads Decision
What is a Business Broker?
What is a Covenant Not to Compete?
What is a Letter of Intent?
What is an E-2 Visa?
What is Cash Flow?
What is Due Diligence?
What is EBITDA?
What is FF&E? - Furniture Fixtures and Equipment
What Is My Business Worth? Learn How Small Businesses Are Priced
What is Seller's Discretionary Cash Flow?
When is the Right Time to Sell My Business?


©2017 BusinessMart.com.
Broker Membership | Terms Of Use | Financial Disclaimer | Privacy Policy | Cookie Policy | Resources | Franchise Opportunities | Website Traffic Ranking | Sitemap | Careers | Contact Us