EBITDA
Operating Income + Depreciation + AmortizationNet Income + Interest + Taxes + D&AEBITDA measures operating profitability before the effects of capital structure, tax environment, and non-cash accounting charges. It is the standard earnings metric for mid-market transactions.
How it's used in a deal
Primary metric for larger businesses (>$5M revenue). Used with EBITDA multiples (typically 3.0x-6.5x).
Worked example
Fictional Precision Auto Service, FY 2024. Missing inputs remain unavailable.
EBITDA: Not available. Expense categories or depreciation/amortization are not fully reported and mapped.
Inputs and supported results from our fictional sample deal report — Fictional, incomplete example. No real customer documents, verified source support or independent accountant review are supplied.
Important caveat
EBITDA does not account for capital expenditure requirements, working capital needs, or debt service obligations.
Frequently asked questions
Should I use SDE or EBITDA to value a small business?
Use SDE when the buyer will replace an owner-operator (most sub-$5M businesses). Use EBITDA when the business runs on a management team that stays after closing. The two can differ by the owner's entire compensation, so using the wrong one skews the valuation badly.
Why do lenders adjust EBITDA?
Reported EBITDA often contains one-time expenses, owner perks, and non-market rent. Lenders normalize these to see repeatable cash flow — see Adjusted EBITDA for how add-backs work.
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Related metrics
Educational content from a decision-support tool — not a CPA audit, review, or assurance engagement, and not tax, legal, or investment advice.