EBITDA
EBITDA is earnings before interest, taxes, depreciation and amortization: operating profit with financing and non-cash charges stripped out, so businesses with different debt loads and asset bases can be compared. It's the earnings measure for larger deals, typically once earnings pass roughly $1 million and the business runs with management rather than on the owner's back. Adjusted EBITDA adds back one-time items, and market salaries get subtracted for roles the owner fills.
The practical question for a seller is SDE versus EBITDA, because the two measures value the owner's labor oppositely. SDE adds your salary back; EBITDA charges the business a market salary for your replacement. A brand producing $900,000 of SDE where the owner does a $150,000-a-year job shows roughly $750,000 of adjusted EBITDA. Smaller buyers price the first number; funds and strategics price the second, usually at a higher multiple, 4x to 7x against SDE's 2.5x to 4.5x, which is why deals near the crossover get modeled both ways.
EBITDA-based buyers also bring EBITDA-grade scrutiny: a quality of earnings review, monthly accrual statements, and a hard look at whether inventory accounting is real. Cash-basis books don't survive that process. Building financials that hold up is the point of exit-grade bookkeeping, and the buyer's checklist is laid out in our QoE guide.
Where this shows up in our work
This isn’t textbook material for us; it’s the day-to-day of keeping seller books right. See how we handle it in practice:
Monthly Ecommerce Bookkeeping→