Published 2025-11-14 · Last updated 2026-01-04 · Reviewed by Valzura Editorial Team
EBITDA Calculator
Measure operating profitability the way acquirers and lenders do.
EBITDA is earnings before interest, taxes, depreciation, and amortization. It measures a company's operating profitability independent of how it is financed, taxed, or its non-cash accounting charges. You calculate it by taking operating income (revenue minus cost of goods sold minus operating expenses) and adding back depreciation and amortization. EBITDA is the earnings figure most acquirers multiply by an industry multiple to arrive at enterprise value.
Total annual sales.
Direct costs of what you sell.
Overhead excluding depreciation and amortization.
Non-cash charge for tangible assets.
Non-cash charge for intangible assets.
Enter your revenue to calculate EBITDA.
How EBITDA is calculated
Start with operating income, which is revenue minus the cost of goods sold and operating expenses. Then add back depreciation and amortization, the two largest non-cash charges. The result strips out financing and accounting decisions so you can compare the underlying operating performance of businesses on equal footing. This is the same figure our valuation calculator computes before applying an industry multiple.
From EBITDA to a valuation
EBITDA by itself is not a value. Buyers multiply it by an EBITDA multiple drawn from comparable sales in your industry. A business with 400,000 dollars of EBITDA in a sector trading at 4.5 times would carry an enterprise value near 1.8 million dollars. The multiple expands with recurring revenue, growth, and lower risk, and contracts when earnings are volatile or owner-dependent.
EBITDA versus SDE: which applies to you?
If your business is small and owner-operated, buyers often prefer seller's discretionary earnings, which adds the owner's salary back in. EBITDA is the standard once revenue climbs past roughly 5 million dollars or a hired management team runs the company. Our SDE versus EBITDA guide walks through exactly which metric a buyer will use for a business your size.
Frequently Asked Questions
What is the difference between EBITDA and SDE?
EBITDA does not add back owner compensation, so it suits businesses with hired management or revenue above roughly 5 million dollars. Seller's discretionary earnings adds the owner's salary and perks back in and is the standard for smaller owner-operated businesses, because an individual buyer will replace the owner's role themselves.
What is a good EBITDA margin?
EBITDA margin equals EBITDA divided by revenue. A margin of 10 to 20 percent is typical for many small businesses, while software and service firms often exceed 30 percent. What counts as strong depends heavily on the industry, so compare against sector benchmarks rather than a single universal number.
Does EBITDA include owner salary?
Standard EBITDA treats a reasonable owner salary as a normal operating expense and does not add it back. If the owner is paid above or below market, analysts normalize the figure to a market-rate salary before applying a multiple, which is a core adjustment in a quality-of-earnings review.
How is EBITDA used to value a business?
Buyers multiply EBITDA by an industry multiple to estimate enterprise value. For example, a business with 500,000 dollars of EBITDA in a sector trading at 4 times EBITDA would be valued near 2 million dollars. The multiple rises with recurring revenue, growth, and lower risk.
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What Is Your Business Worth?
EBITDA is only half of a valuation. Apply an industry multiple to your EBITDA and see the full range.
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