Adjusted EBITDA
Adjusted EBITDA is earnings before interest, taxes, depreciation, and amortization, adjusted for non-recurring, non-operating, and owner-related items. The number buyers multiply.
In a sale
Why does adjusted EBITDA matter in a sale?
Adjusted EBITDA is the figure a buyer multiplies, so every dollar in it counts twice: once in the earnings and again in the price. It is built step by step from the financial statements, and the buyer's accountants will rebuild it in diligence. The number that holds up is the one with documentation behind each adjustment, including the adjustments that lower it.
Where it comes up
Read it in context
In the articles
- The 4.5x problemMost founders assume their business is worth the trade multiple. That assumption costs millions.
- Same business, two outcomesTwo identical businesses, one prepared and one not, sell for very different prices.
- An add-back is an argumentAdjusted EBITDA is built, not declared, and the buyer's accountants will rebuild it.
- When a buyer calls firstAn inbound offer is information, not a decision.
- Real estate and the operating businessOwner-held real estate is a second transaction inside the first.
- Bigger before you sell: combinations and add-onsSometimes the best pre-sale move is an acquisition of your own.
- Multiple entities, one storyFounders build in pieces. Buyers buy a whole.
In The FNDRS Playbook
- PB06 The exit readiness matrixValue and readiness are different things. Both decide the outcome.
- PB09 The size premium staircaseBigger businesses get higher multiples. Not because of size, but because of what size proves.
- PB10 The adjusted EBITDA bridgeAdjusted EBITDA is built, not declared.
- PB11 The add-back defensibility matrixAn add-back is an argument. Some arguments win.
- PB19 The three numbersWhat you need. What the market pays. What you keep.
See the terms with your own numbers
The Go-To-Market Analysis (GTMA) builds the file a buyer would build on your business, before a buyer does.