EBITDA
The earnings number buyers use to value mid-sized businesses. Stands for Earnings Before Interest, Taxes, Depreciation, and Amortization.
EBITDA is your business's profit before four things get pulled out: interest on debt, taxes, depreciation on equipment, and amortization on intangibles. It's the number buyers use to compare your business to others without getting confused by how you financed it or how the IRS treats it. EBITDA is mostly used for businesses with more than about $1M in profit. If you're smaller than that, the number that matters for you is SDE — see the next entry.
EBITDA is the number every institutional buyer leads with when valuing a business above roughly $1M in earnings.
Buyers don't accept your reported EBITDA — they rebuild it line by line.
