Date of Award

2026

Degree Name

Business Administration

College

College of Business

Type of Degree

D.B.A.

Document Type

Dissertation

First Advisor

Dr. Marc Sollosy

Second Advisor

Dr. Jingran Zhang

Third Advisor

Dr. Whitney O. Peake

Fourth Advisor

Dr. Kevin Cox

Abstract

This dissertation compares the predictive accuracy and stability of Seller’s Discretionary Earnings (SDE) and Earnings Before Interest, Taxes, Depreciation, and Amortization (EBITDA) in explaining realized sale prices of microbusinesses. Microbusinesses, defined as firms with fewer than ten employees and annual revenue below $2.5 million, face persistent valuation challenges due to information asymmetry, owner dependence, and informal financial reporting. The study analyzes 5,499 completed U.S. transactions from the DealStats database (2014–2024) after applying microbusiness criteria and outlier trimming. Predictive accuracy is measured by absolute percentage error between actual sale prices and prices implied by each metric. Findings show that SDE-based predictions are significantly more accurate and stable than EBITDA-based predictions, with lower absolute percentage errors and reduced error variance. Moderation analyses reveal that net profit margin conditions relative performance (SDE accuracy declines as margins increase while EBITDA accuracy improves) and that firm size (proxied by revenue) enhances EBITDA predictive power but has no significant effect on SDE. Overall, SDE more effectively captures transferable owner-level cash flows in typical microbusiness contexts, whereas EBITDA becomes more reliable as firms achieve higher profitability and modest scale, underscoring the need to align valuation metrics with a firm’s informational environment and structural characteristics for improved exit planning in private, owner-operated markets.

Subject(s)

Industrial management.

Finance.

Financial management.

Small business.

Business enterprises -- Valuation.

Small business -- Finance.

Small business -- Valuation.

Small business -- Management.

Small business -- Accounting.

Information asymmetry.

Entrepreneurship.

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