The number that decides what your business is worth. Not revenue. Not profit. Not turnover. EBITDA. Earnings Before Interest, Tax, Depreciation and Amortisation. It sounds like accountant jargon. But understanding it could be the difference between selling your business for £500k or £5 million. Here's why it matters. When a buyer, investor, or bank looks at a business, they don't want to see your tax bill or your financing choices. Those are yours — not the business's. EBITDA strips all of that out and asks one clean question: how much cash does this business actually generate from its core operations? That's why it's used as the standard valuation benchmark across private equity, mergers and acquisitions, and commercial lending. Multiply EBITDA by the relevant sector multiple — anywhere from 3x to 12x depending on industry, growth rate, and risk profile — and you get an enterprise value. It also levels the playing field. A business with heavy debt looks very different on a net profit basis versus EBITDA. Private equity firms use it to compare acquisitions across sectors. Banks use it to assess loan serviceability. Buyers use it to justify their offer price. It is not a perfect measure. It ignores capital expenditure, working capital, and cash conversion. A high EBITDA business can still run out of cash. That's why sophisticated investors always look at EBITDA alongside free cash flow. But as a starting point for understanding business value? It remains the most widely used number in the room. Know yours. What stage is your business at — and have you calculated your EBITDA yet? Drop it in the comments or DM me to talk through what it means for your growth or exit strategy.

Posted by Per & Lily at 2026-04-01 08:19:34 UTC