Free EBITDA Calculator — EBITDA and Adjusted EBITDA
Add interest, tax, depreciation and amortisation back to your net profit to get EBITDA — then keep going. Most free calculators stop at that first sum. This one also normalises for owner pay and one-off costs, which is the adjusted EBITDA figure a buyer or a lender actually works from. Your numbers stay in your browser and are never sent to Instilus.
How the EBITDA formula works
EBITDA = net profit + interest + tax + depreciation + amortisation
Adjusted EBITDA = EBITDA + owner add-backs + one-off costs
Each line you add back is something that tells you about the owner rather than the business. Interest reflects how the current owner chose to fund it. Tax reflects their structure and reliefs. Depreciation and amortisation are accounting write-downs of money spent in earlier years. Strip all four out and what is left is closer to what the trading operation itself earns.
Normalisation continues the same logic. If the owner pays themselves 140,000 for a job a hired manager would do for 100,000, then 40,000 of "cost" disappears the day they leave — so it is added back. If they pay themselves 60,000 for that same job, a buyer has to find another 40,000 to replace them, and it comes off.
- EBITDA margin % = EBITDA ÷ revenue × 100
- Adjusted EBITDA margin % = adjusted EBITDA ÷ revenue × 100
- Indicative enterprise value = adjusted EBITDA × the multiple you enter
Worked example
A business made 180,000 net profit last year on revenue of 1,500,000. It paid 12,000 in interest and 45,000 in tax, charged 30,000 of depreciation and 8,000 of amortisation. The owner takes 40,000 more than a hired manager would cost, and there was a 15,000 legal settlement that will not recur.
| EBITDA | 180,000 + 12,000 + 45,000 + 30,000 + 8,000 = 275,000 |
| EBITDA margin | 275,000 ÷ 1,500,000 = 18.3% |
| Add-backs | 40,000 + 15,000 = 55,000 |
| Adjusted EBITDA | 275,000 + 55,000 = 330,000 |
| Adjusted EBITDA margin | 330,000 ÷ 1,500,000 = 22.0% |
| Indicative value at 4.5× | 330,000 × 4.5 = 1,485,000 |
The gap between 275,000 and 330,000 is worth 247,500 at that multiple. That is why the add-back schedule, not the first sum, is where the money is — and why a buyer's adviser goes through it line by line.
Edge cases this calculator handles
- A loss-making year. Net profit takes a negative, because a business can lose money after interest and depreciation and still have positive EBITDA. That contrast is often the whole point of calculating it.
- An underpaid owner. Owner add-backs take a negative, so the cost of replacing a founder who pays themselves too little comes off rather than being ignored.
- Negative adjusted EBITDA with a multiple entered. No indicative value is shown. A negative number times a multiple is arithmetic, not a valuation, and a business at negative EBITDA is valued on other bases entirely.
- No revenue entered. The margins are left out rather than shown as zero, because an unknown margin is not a margin of nothing.
- Blank add-back lines. Only net profit is required. Anything left blank counts as zero, so a business with no borrowing does not have to type 0 into the interest box.
Frequently asked questions
What does EBITDA stand for and how is it calculated?
Earnings Before Interest, Tax, Depreciation and Amortisation. Start from net profit on the profit and loss account and add back those four lines: EBITDA = net profit + interest + tax + depreciation + amortisation. The point is to show what the trading operation earns before financing choices, the tax position and historic asset write-downs.
What is the difference between EBITDA and adjusted EBITDA?
Adjusted or normalised EBITDA goes further and removes costs that belong to the current owner rather than to the business. Typically that is owner pay above a market-rate salary for the job, personal costs run through the company, and genuine one-offs such as a legal settlement or a relocation. It is the figure buyers and lenders work from, because it estimates what the business would earn under someone else.
What counts as a legitimate add-back?
A cost that genuinely will not exist for the next owner, and that you can evidence. Owner salary above market rate, a family member on the payroll who does not work there, personal vehicles or travel, and one-off legal, rebranding or relocation costs. A cost that recurs is not an add-back however unwelcome it is, and a buyer’s advisers will remove any add-back you cannot document.
What if the owner is paid below a market salary?
Then the adjustment goes the other way. A buyer has to hire someone to do that job, so the shortfall between the owner’s actual pay and a market rate is deducted, not added. Enter it as a negative owner add-back. Businesses run by an underpaid founder routinely look more profitable than they are until this is corrected.
Is EBITDA the same as cash flow?
No, and treating it as cash flow is the most common mistake made with it. EBITDA ignores capital expenditure, movements in working capital, loan repayments and tax actually paid. A business with real EBITDA can still run out of cash. Use a cash flow forecast for whether you can pay people next month, and EBITDA for what the operation earns.
What multiple should I apply to EBITDA?
This calculator does not suggest one, because it varies enormously by sector, size, growth rate, customer concentration and how dependent the business is on its owner, and a number pulled off the internet is worth nothing in a negotiation. Enter a multiple you have been given by a broker, an accountant or comparable transactions in your sector, and treat the result as an indication to test rather than a price.
What is a good EBITDA margin?
EBITDA margin is EBITDA divided by revenue, and it is only meaningful against your own sector and your own history. What it is genuinely useful for is direction: a margin falling while revenue grows says the growth is being bought rather than earned, which is exactly what a buyer looks for.