Price/Seller's Discretionary Cash Flow (P/SDCF)

P/SDCF is often used in the valuation of smaller companies. This method is based on the premise that a buyer would pay a multiple of the discretionary cash flow that the owner would control by purchasing the business. Discretionary cash flow in this instance is defined as net profit before taxes, plus any compensation to the owner, depreciation, other non-cash charges and non-business related expenses.