ADJUSTED EBITDA · BROWSER-ONLY WORKSHEET
Normalize EBITDA without hiding the add-backs.
Start with net income. Reconcile reported EBITDA. Then expose owner compensation, replacement management, one-time expenses, personal costs, and unusual income before a multiple touches the number.
Build my reconciliationNET INCOME → REPORTED EBITDA → ADJUSTED EBITDA
Build a reconciliation a buyer can challenge.
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WORKED EXAMPLE
The same company can show three earnings numbers.
Every amount comes from one illustrative period. The bridge makes the difference reproducible instead of presenting a mystery “adjusted” total.
The financial-statement starting point.
After $450,000 of interest, tax, depreciation, and amortization.
After a visible net normalization of $200,000.
THREE TESTS
A credible adjustment survives the next question.
Where is it in the records?
Keep the general-ledger entry, invoice, payroll record, agreement, or other support that ties the amount back to the period.
What cost does a buyer inherit?
Related-party pay and owner expenses need comparison with the market cost of the work, property, or service that continues.
Why will it not happen again?
Calling a cost “one-time” is not evidence. Explain the event, completion date, and why ongoing operations do not require it.
DEFINITION CONTRACT
Reconcile first. Name the adjusted measure honestly.
The SEC defines EBITDA using net income plus interest, taxes, depreciation, and amortization, and distinguishes calculations with further changes as “Adjusted EBITDA.” Its guidance also emphasizes reconciliation and enough detail to understand every reconciling item. This private-company worksheet adopts that transparency principle; it does not imply that private businesses are SEC registrants.
NEXT · MATCH THE MARKET
Once EBITDA is defensible, test the size tier.
The worksheet carries supported adjusted EBITDA into the cited private-company multiple calculator without sending the amount to our server.
COMMON QUESTIONS
Adjusted EBITDA without the black box.
How do you calculate adjusted EBITDA?
Start with net income and add interest expense, income tax expense, depreciation, and amortization to reconcile reported EBITDA. Then show each normalization separately: owner or family compensation less the ongoing replacement-management cost, documented non-recurring expenses, personal or non-operating expenses, and any non-recurring income that should be subtracted.
Can all owner compensation be added back to EBITDA?
No. If a buyer still needs someone to perform the owner’s role, market-rate replacement compensation remains an operating cost. The defensible adjustment is the compensation already in expenses minus the ongoing replacement cost. If the owner is underpaid, that adjustment can reduce EBITDA.
What expenses can be added back to EBITDA?
Possible candidates include documented costs that are non-recurring, owner-specific, non-operating, or above an arm’s-length amount. Ordinary future payroll, rent, software, marketing, maintenance, and other costs needed to sustain the assumed revenue should remain. A worksheet cannot determine buyer acceptance; the evidence and deal context do.
Why subtract non-recurring income?
Normalization works in both directions. If the period includes unusual income a buyer should not expect again, leaving it in would overstate maintainable earnings. A credible reconciliation removes unusual gains as visibly as it adds back unusual costs.
What is the difference between adjusted EBITDA and SDE?
Adjusted EBITDA normally preserves market-rate management compensation. SDE is designed for an owner-operated business and generally adds one working owner’s compensation and benefits to the earnings base. The measures use different buyer and operating assumptions and should not be interchanged.