Profit EBITDA decoded: Get a higher offer and smoother exit

You built something from nothing. You wore a dozen hats at once. Now a buyer slides a term sheet across the table and you’re asking what all those years are really worth.

Here’s the simple truth most founders learn late: buyers don’t buy your grind, they buy your numbers. And the number they push hardest isn’t the one at the bottom of your tax return.

Get this wrong and you leave real money behind. Get it right and you turn a good business into a clean exit. The difference is how you talk about profit—and how you prove the cash the business can produce without you. That matters right now, because buyers are picky, capital is expensive, and the market rewards clarity.

Your valuation hangs on the number you think you know

amortisation
When most owners say “profit,” they mean net income. When buyers say “profit,” they mean EBITDA—earnings before interest, taxes, depreciation, and amortisation. It’s a mouthful, but the idea is simple: strip out financing and tax choices, back out non-cash charges, and look at what the operation throws off in normal conditions.

Why this frame matters. Two companies can show the same net income and have very different EBITDA. If you bought a machine and book straight-line depreciation, net income falls—but your bank balance didn’t. EBITDA adds that back to show operating performance. On the other hand, if you juiced a weak quarter with one-off discounts, the cash is gone and EBITDA won’t hide it.

Buyers will press you for EBITDA, then ask you to prove every line that got you there. Not to be clever, but to understand the engine they’re buying and the fuel it needs to keep running.

Clean EBITDA beats messy profit

Maya ran a niche distribution company. Her tax profit looked thin because she paid herself well, ran a family vehicle through the business, and wrote off a once-in-a-decade warehouse move. The first buyer anchored low. She paused, cleaned her books, and came back with a tight bridge from net income to EBITDA—clear add-backs, labeled and evidenced. Same company. Different story. Higher offer. Faster diligence.

This is why clean EBITDA wins. You show what the business earns without the noise. You separate owner lifestyle from company reality. You isolate true one-time events so the buyer isn’t paying for your past. You turn a negotiation about belief into a negotiation about facts.

Ask yourself: if a stranger combed through your ledger today, could they follow the path from profit to EBITDA without a tour guide?

Normalise

Add-backs are the adjustments that move you from net income to EBITDA. They can lift your valuation—or blow it up—depending on evidence.

• Owner compensation above market. If you pay yourself over market, document the market rate and add back the difference. Use real data. Show a relevant comp survey or recruiter quotes.
• One-time events. Lawsuit settlements, a relocation, a temporary consultant to fix a mess. If it won’t repeat, collect the invoices and add it back.
• Personal or discretionary spend. Extra travel, family phone plans, a car that never carries inventory. Be honest, consistent, and complete.
• Growth investments. Handle with care. If you hired a salesperson three months ago and the pipeline is real, you can argue the cost is upfront and the revenue is coming. Some buyers will listen. Many won’t. Bring proof, not hope—pipeline detail, conversion rates, early wins.

This is where deals wobble. Overreach and you lose credibility. Under-claim and you leave money. Your goal: make the add-backs so clear a junior analyst could replicate your math and get the same answer.

Normalise the business before you sell

You can shape EBITDA long before a buyer shows up—not with tricks, with discipline.

• Tidy your chart of accounts. Put expenses where they belong. Kill vague labels. Stop burying personal items. Clean categories create clean questions and faster diligence.
• Trim the noise early. If you’ll cut discretionary spend, do it 12 months before you sell so the run rate looks normal and repeatable. Buyers want at least a year of clean results; two is better.
• Lock in your revenue base. Renew key customers early. Reduce single-client concentration. Where it makes sense, move month-to-month into term agreements. Buyers pay more for cash flows that stick.
• Dial in pricing and margins. If you made pricing moves, show the before-and-after by month. Visible margin lift beats theoretical uplift every time.

Profit to EBITDA is not just a formula—it’s a rhythm. You’re telling a story of dependable earnings and proving it with patterns that hold under bright light.

Show the cash future, not the glory past

standardised
A buyer is purchasing next year, not last year. Tie your EBITDA to forward reality.

• Seasonality. Map the ups and downs so a buyer can see a normal year. If Q4 carries the year, show why—and how inventory and staffing flex with it.
• Working capital. EBITDA isn’t cash. If growth needs more inventory or receivables, say so. Quantify the cash that must stay in the business to hit the forecast. Surprises here kill deals.
• Operational leverage. Point to the systems that keep EBITDA steady as you scale. For example: one manager can oversee ten crews because the playbook is standardised. Buyers love margins that hold as volume rises.
• Transition risk. If you’re the rainmaker, prove how the business sells without you. A buyer will haircut any EBITDA they think walks out when you do.

Make your EBITDA feel like a reliable promise, not a lucky year. Use simple schedules, a one-page bridge, and a clear voice. Less drama. More receipts.

Key takeaway

Buyers don’t pay for stories. They pay for confidence in cash. Net income starts the conversation; EBITDA closes the gap between what your heart says your business is worth and what a rational buyer will pay. Nail the bridge from profit to EBITDA and you shift the negotiation in your favor.

Reflective question

If a buyer asked you to defend every step from profit to EBITDA today, could you put the evidence on the table in ten pages or less? If not, what will you fix in the next ninety days to make the answer an easy yes?