EBITDA
EBITDA is earnings before interest, taxes, depreciation, and amortization. The starting point for the adjusted EBITDA buyers multiply.
In a sale
What is the difference between EBITDA and adjusted EBITDA?
Adjusted EBITDA is EBITDA adjusted for owner-related and one-time items, and it is the number buyers multiply; reported EBITDA is only the starting point for most conversations about price. Buyers rarely stop at the reported figure. Knowing the difference between the two is the first step to knowing what a buyer will pay.
Where it comes up
Read it in context
In the articles
- Where founders leave money on the tableMost of what founders lose in a sale is lost in their own decisions, and each one has a fix.
- 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.
- Strategic, platform, add-on, sponsor: who buys whatDifferent buyers pay for different things. The process should include several.
- 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
- PB02 The multiple rangeYour industry has a range. Where you land is decided by evidence.
- PB03 The category ladderBuyers price the category before they price the company.
- 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.
- PB18 The earn-out design gridAn earn-out you cannot control is a price cut with extra steps.
- 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.