adjusted EBITDA
Adjusted EBITDA strips out one-time costs and unusual items. It gives a clearer picture of recurring profitability and helps investors compare performance across businesses during valuation or due diligence.
Adjusted EBITDA: The cleanest version of operational performance
This concept tarts with the standard EBITDA—earnings before interest, taxes, depreciation, and amortization—and then goes further. It removes one-time costs, extraordinary events, and non-operating items to reveal how the business performs on a recurring basis.
It’s not accounting fiction. It’s operational focus. When you’re selling a business, raising a round, or presenting to investors, adjusted EBITDA shows the story behind the numbers. It filters out noise to highlight consistency.
This is what makes it so common in M&A, private equity, and late-stage reporting.
Why one number doesn’t tell the whole story
A company might post $3M in EBITDA. But that year, it paid $500K in legal fees for a one-time lawsuit. It also lost $300K due to a facility relocation. Neither expense reflects how the business usually runs. So adjusted EBITDA removes them.
Now the number is $3.8M. That’s what the buyer sees as sustainable.
Of course, adjustments can be aggressive. Founders might add back personal expenses, inflated salaries, or even failed initiatives. That’s why due diligence matters.
This metric doesn’t replace judgment. It complements it.
What belongs in adjusted EBITDA and what doesn’t
True adjustments reflect non-recurring items: restructuring costs, founder compensation, legal settlements, discontinued operations.
What doesn’t belong? Recurring inefficiencies, optimistic projections, or wishful thinking.
The goal isn’t to inflate the number. It’s to isolate performance.
Use it to build trust, not just value
Adjusted EBITDA helps you frame the business honestly. If you’re prepping for a sale or raise, it shows you understand your own numbers—and respect the investor’s view.
Anyone can report profit. The smart ones show what’s behind it.
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