EBITDA Rekenmachine

Local entrepreneurs use our EBITDA Calculator to evaluate neighborhood businesses like laundromats, cafes, or car washes before making an offer to buy.

Freelancers and independent consultants use it to see their true earnings, adding back the depreciation on their expensive computers and software licenses.

Small business owners use EBITDA to pitch their companies to local banks for expansion loans, proving their core operations are highly profitable.

What is EBITDA in plain English?

Think of EBITDA as your business's raw earning power before the accountants and tax collectors get their hands on it. It stands for Earnings Before Interest, Taxes, Depreciation, and Amortization. By stripping away these extra expenses, it lets you see how much cash your day-to-day operations actually generate. It is the ultimate tool for seeing if a business model actually works.

Why should a small business owner care about EBITDA?

As a small business owner, your net profit can look artificially low due to things like equipment depreciation or loan interest. EBITDA helps you see the true health of your daily operations, which is super useful when talking to lenders or potential buyers. It tells you if your core business is thriving, even if your tax return says you barely broke even. It is also great for comparing your performance to similar shops in your town.

What is the difference between EBITDA and Net Income?

Net income is your absolute bottom line—it is what is left over after every single bill, tax, and interest payment has been subtracted. EBITDA, on the other hand, adds those things back to show your raw operating earnings. While net income tells you what you actually get to keep, EBITDA tells you how well your business performs at its core. Both are important, but they tell very different stories about your financial health.

Why do we add back depreciation and amortization?

Depreciation and amortization are just accounting tools used to spread the cost of big purchases over several years. For example, if you buy a delivery van, you do not write off the whole cost in year one; you write off a portion of it every year as depreciation. Since no actual cash leaves your bank account for this yearly write-off, we add it back to see how much real cash your business is generating. It gives you a much clearer picture of your day-to-day cash flow.

Is EBITDA the same as cash flow?

Not quite, though they are close cousins! EBITDA shows your earnings from operations, but it does not account for things like changes in inventory, bills you have not paid yet, or money customers owe you. A business can have a great EBITDA but still run out of cash if customers are not paying their invoices on time. Always look at your actual bank account balance alongside your EBITDA to get the full picture.

Can EBITDA be negative?

Yes, a business can absolutely have a negative EBITDA. If your EBITDA is negative, it means your core business operations are losing money before you even pay your taxes or loan interest. This is a major red flag, indicating that your pricing might be too low, your rent is too high, or you are not selling enough products to cover basic costs. It is a sign that the business model needs a serious rethink.

How do I use this calculator to compare two businesses?

To compare two businesses, simply run the EBITDA calculation for both and look at the results side-by-side. This is especially helpful if one business has a lot of debt and the other does not, as it levels the playing field. You can also calculate their EBITDA margins by dividing EBITDA by total revenue. The business with the higher margin is generally more efficient at turning sales into raw profit.