EBITDA Business Valuation Calculator
EBITDA multiples drive business valuations. Calculate company value using industry-specific multiples and adjustments.
How the EBITDA Business Valuation Calculator works
Calculate adjusted EBITDA, apply industry multiples, and adjust for size, risk, and growth. Determine enterprise and equity values with comparable transaction analysis.
EBITDA valuation is standard in M&A. This calculator applies professional techniques used by investment bankers and business brokers.
How it works
Tutorial
EBITDA-based valuation is the most common method for valuing established businesses in mergers, acquisitions, and private equity transactions. EBITDA (Earnings Before Interest, Taxes, Depreciation, and Amortization) measures core operating profitability before capital structure and accounting decisions. By applying industry-specific multiples to EBITDA, you can quickly estimate enterprise value—what the entire business operations are worth before considering debt and cash. This method dominates M&A because it’s standardized, comparable across companies, and focuses on operational cash generation.
Whether you’re selling your business, evaluating acquisition targets, or planning succession, understanding EBITDA multiples prevents catastrophic mistakes. A business generating $2M EBITDA might be worth $6M (3x multiple) or $14M (7x multiple) depending on industry, growth, customer concentration, and competitive advantages. Getting the multiple wrong by 1x means missing $2 million in value—enough to fund retirement or overpay disastrously. This calculator applies professional valuation techniques used by investment bankers and business brokers.
The Basic Formula
| Component | Formula | Purpose |
|---|---|---|
| Adjusted EBITDA | EBITDA + Owner Excess Comp + Non-Recurring Items | Normalize earnings for new owner |
| Enterprise Value | Adjusted EBITDA × Industry Multiple | Total business operating value |
| Equity Value | Enterprise Value + Cash – Debt | Value to shareholders |
| Multiple Range | 3-7x for small businesses, 8-15x for tech/SaaS | Industry and size dependent |
Step-by-Step Calculation
Example: Manufacturing business with $1.8M reported EBITDA, owner paid $300K (market rate $150K), $200K one-time legal settlement, $500K cash, $1.2M debt, 15% annual revenue growth
Step 1: Calculate Adjusted EBITDA
| Item | Amount | Explanation |
|---|---|---|
| Reported EBITDA | $1,800,000 | From financial statements |
| Owner Compensation Adjustment | +$150,000 | $300K paid – $150K market rate |
| One-Time Legal Settlement | +$200,000 | Non-recurring expense |
| Personal Expenses (car, travel) | +$50,000 | Non-business expenses removed |
| Adjusted EBITDA | $2,200,000 | Normalized operating profit |
Step 2: Determine Valuation Multiple
| Factor | Impact | Multiple Effect |
|---|---|---|
| Base Industry (Manufacturing) | Median multiple | 5.0x |
| Revenue Growth (15%) | Strong growth premium | +0.8x |
| Customer Concentration | Top 3 customers = 60% of revenue | -0.5x |
| Recurring Revenue | 40% contracts, 60% transactional | +0.3x |
| Business Size | $2.2M EBITDA (small-medium) | -0.1x |
| EBITDA Margins | 18% (above industry average) | +0.5x |
| Applied Multiple | Sum of adjustments | 6.0x |
Step 3: Calculate Enterprise and Equity Value
| Component | Calculation | Amount |
|---|---|---|
| Adjusted EBITDA | Normalized earnings | $2,200,000 |
| Valuation Multiple | Industry-adjusted | 6.0x |
| Enterprise Value | $2,200,000 × 6.0 | $13,200,000 |
| Plus: Cash on Hand | Liquid assets | +$500,000 |
| Less: Interest-Bearing Debt | Liabilities transferred | -$1,200,000 |
| Equity Value | Value to owner | $12,500,000 |
What This Means
This manufacturing business is worth approximately $12.5 million to the equity holders (owners). The enterprise value of $13.2M represents the operating business value—what someone would pay for the business operations before settling debts and collecting cash. The 6.0x EBITDA multiple is reasonable for a growing manufacturing company with decent margins and some recurring revenue, though customer concentration creates risk that caps the multiple below industry leaders who might command 7-8x.
The $400,000 in EBITDA adjustments significantly impacted value—adding $400K to EBITDA at a 6x multiple creates $2.4M in additional enterprise value. This is why “cleaning up” financials before sale is critical: separating personal from business expenses and documenting one-time costs. For the owner, this valuation suggests they could exit with $12.5M. After taxes (assume 20% capital gains), they’d net roughly $10M—enough to retire comfortably if they started the business from scratch or bought it for much less years ago.
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