E.B.I.T.D.A. is Oftentimes Misunderstood

Understanding E.B.I.T.D.A.

As a Business Broker, I see the term E.B.I.T.D.A. being confused with Net Cash Flow. Earnings Before Interest, Tax, Depreciation, & Amortization only tells part of the story, as it does not consider the owner’s salary or qualifiable add-backs, such as the Mercedes Benz the owner is driving. Two (2) identical businesses can have huge variations in E.B.I.T.D.A. based on accounting practices. Instead, the financial health of a business should be based on Seller’s Discretionary Earnings, AKA Net Cash Flow, AKA Owner Benefit, which is the bottom line.

If you have an interest in selling your business, please contact Tom Brubaker at TAMBAY Business Brokers, 813.493.2913, or Tom@TamBayMail.com.