EBITDA
Earnings Before Interest, Taxes, Depreciation, and Amortization -- a measure of operating profitability.
EBITDA strips out financing decisions, tax environments, and accounting methods to show a business's core operating profitability. For larger digital businesses ($1M+ revenue), EBITDA multiples are the standard valuation method. Typical EBITDA multiples: 4-8x for established SaaS, 3-5x for e-commerce, 6-12x+ for high-growth platforms. EBITDA is preferred over SDE for businesses with multiple employees because it doesn't add back a single owner's salary.
Related Terms
SDE (Seller's Discretionary Earnings)
Net profit plus owner salary and one-time expenses -- the true cash flow to the owner.
Revenue Multiple
A multiplier applied to revenue to estimate business value (e.g., 3x annual revenue).
SaaS Valuation
The process of determining the fair market value of a software-as-a-service business.