EBITDA Calculator
Compute EBITDA and adjusted (normalized) EBITDA from your P&L — and see the value range the right multiple implies, without mixing it up with SDE.
Written by Dorothy Ibrahim, 10+ years in banking & finance
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How we calculate this
This calculator computes EBITDA — earnings before interest, taxes, depreciation, and amortization — and adjusted (normalized) EBITDA, which also adds back owner compensation above a market-rate manager and one-time items. Adjusted EBITDA is the number buyers of manager-run businesses actually price on, and the tool shows the value range it implies at small-business multiples. It also flags the SDE↔EBITDA transition so you do not value a Main Street business on the wrong metric.
The formulas
- EBITDA
- net income + interest + taxes + depreciation + amortization
- Adjustments
- owner excess compensation + one-time itemsExcess compensation means salary above a market-rate replacement manager — not the owner’s full salary (that is SDE).
- Adjusted (normalized) EBITDA
- EBITDA + adjustments
- Implied value range
- adjusted EBITDA × 3 to 5× (small-business range)Mid-market companies trade higher, roughly 4–7×; a negative adjusted EBITDA makes an earnings multiple meaningless.
Worked example
- Say net income is $200,000, interest is $20,000, taxes are $40,000, depreciation is $25,000, and amortization is $5,000.
- EBITDA = $200,000 + $20,000 + $40,000 + $25,000 + $5,000 = $290,000.
- Adjustments: owner excess compensation of $30,000 plus one-time items of $10,000 = $40,000.
- Adjusted EBITDA = $290,000 + $40,000 = $330,000.
- At small-business multiples of 3–5×, that implies a value range of $990,000–$1,650,000.
- Because adjusted EBITDA is under the roughly $1–2M transition zone, the tool also suggests checking SDE — buyers of a business this size usually price on SDE, not EBITDA.
Rates, benchmarks & sources
- EBITDA multiple ranges: 3–5× for small businesses, 4–7× for mid-market. Wide ranges; add-backs and comparability drive real value. — BizBuySell / DealStats / First Page Sage / Peak transaction aggregators (rule-of-thumb ranges)
- EBITDA = net income + interest + taxes + depreciation + amortization; "adjusted" or "normalized" EBITDA additionally removes non-recurring and owner-specific items. — Standard accounting definition
Figures current as of 2026-07-02. See our methodology & editorial standards for how constants are versioned and verified.
What this tool doesn’t model
- EBITDA ignores capital expenditure — a machine shop that must replace equipment every few years has real costs that EBITDA hides, which is why buyers also look at free cash flow.
- The 3–5× multiple range is a broker-survey heuristic, not an appraisal; a real sale requires a professional valuation and market comparables.
- The tool takes your "owner excess compensation" figure at face value — buyers will benchmark a market-rate manager salary themselves and may disagree.
- One-time items are the most-challenged adjustment in diligence; expenses that recur in practice get added back to costs, cutting adjusted EBITDA and price.
Frequently asked questions
What is the difference between EBITDA and SDE?
SDE adds back the owner's FULL salary, because the assumed buyer is an owner-operator who replaces you. EBITDA adds back only compensation above a market-rate manager, because the assumed buyer keeps professional management in place. Businesses under roughly $1–2M in earnings trade on SDE at 1.5–3.5×; larger ones trade on EBITDA at 3–5× or more. Applying an EBITDA multiple to an SDE number double-counts the owner's salary and overstates value.
What is adjusted or normalized EBITDA?
It is EBITDA with owner-specific and non-recurring items stripped out so the number reflects what the business earns under normal, arm’s-length operation: salary you pay yourself above a market-rate manager, a one-time lawsuit settlement, a flood repair. Buyers price on adjusted EBITDA, but they scrutinize every adjustment — items that are really ongoing costs get stripped back out in due diligence.
My adjusted EBITDA is under $2M — should I be using SDE instead?
Probably, if you work in the business yourself. Below roughly $1–2M in earnings, the likely buyer is an owner-operator, and those deals price on SDE with SDE multiples. Near the transition, run both calculators and compare: the SDE number will be larger (it adds back your full salary) but carries a lower multiple range. Using the wrong metric with the wrong multiple mis-prices the deal in either direction.
Can these multiples tell me what my business will actually sell for?
No — they are rules of thumb from transaction aggregators and broker surveys, useful for a first-pass range. Actual sale prices depend on industry, growth, customer concentration, management depth, and deal structure, and the only way to know is to test the market. Get a professional valuation or broker opinion of value before making any sale decision.
What does a negative EBITDA mean for valuation?
An earnings multiple has nothing meaningful to multiply, so a multiple-based value does not exist. Buyers of unprofitable businesses look at net asset value, revenue (for high-growth or recurring-revenue models), or a turnaround thesis instead. The tool still shows the EBITDA math so you can see how far below breakeven the earnings are.
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themoneysheet provides educational estimates, not financial, tax, or legal advice. Figures use published rates and formulas current as of the date shown, but your situation may differ. Consult a qualified professional (CPA, attorney, or licensed advisor) before making financial decisions.