When it comes time to sell your business, one number will dominate every conversation: EBITDA. Buyers, lenders, and brokers all use it to determine what your company is worth. But here's what many owners don't realize—the raw EBITDA on your financial statements is rarely the number that matters. What matters is Adjusted EBITDA, and understanding how to calculate it correctly can mean the difference between leaving money on the table and maximizing your exit.

Why EBITDA Matters for Your Exit

EBITDA—earnings before interest, taxes, depreciation, and amortization—has become the standard language of business valuation. It strips away financing decisions, tax strategies, and accounting methods to reveal the core earning power of your operation. When a buyer applies an industry multiple to value your business, they're almost always applying it to some version of EBITDA.

That's why getting this number right is critical. Understate it, and you undervalue your life's work. Overstate it with aggressive adjustments, and you'll lose credibility with serious buyers during due diligence.

What Are EBITDA Adjustments?

Adjusted EBITDA starts with your reported earnings and then "normalizes" the number by adding back expenses that won't exist under new ownership or that don't reflect ongoing operations. Common adjustments include:

• Owner compensation above market rate – If you're paying yourself $300,000 but a replacement manager would cost $150,000, that $150,000 difference gets added back.

• Owner perks and personal expenses – Vehicles, travel, family members on payroll, or other expenses that benefit you personally rather than the business.

• One-time costs – Legal settlements, major repairs, relocation expenses, or consultant fees for a specific project that won't recur.

• Non-operating income or expenses – Gains or losses from selling equipment, rental income from unused property, or other items outside your core business.

These adjustments help buyers see what the business would earn under professional, market-rate management—which is exactly what they're buying.

Where Adjustments Go Wrong

Problems arise when owners or advisors get too creative. Labeling recurring expenses as "one-time" year after year destroys credibility. Excluding costs that are genuinely necessary to run the business—like ongoing marketing, software subscriptions, or regular maintenance—inflates EBITDA in ways that won't survive buyer scrutiny.

The rule of thumb: if an expense shows up every year, it's not one-time. If it's necessary to generate revenue, it belongs in your EBITDA calculation.

How YourExitValue.com Helps You Get It Right

This is where accurate data and proper methodology matter. YourExitValue.com calculates your business valuation using multiple industry-standard approaches—including EBITDA multiples, SDE multiples, revenue multiples, asset-based valuation, and discounted cash flow analysis. By pulling live market data for your specific industry via NAICS code, the platform ensures your valuation reflects current market conditions, not outdated assumptions.

The result is a comprehensive Broker Opinion of Value report that shows you exactly where you stand—and gives you credibility when it's time to talk to buyers.

But knowing your value today is only half the equation. YourExitValue.com also provides exit readiness assessments to identify gaps in your business's sellability, scenario modeling for different exit strategies, and a Suggested Workplan that keeps you accountable over a two-year timeline. Combined with the Asset Gap Calculator for personal financial planning, you'll know not just what your business is worth, but whether that value is enough to fund the retirement you want.

The Bottom Line

EBITDA adjustments aren't about gaming the system—they're about presenting your business accurately and credibly. Done right, they help buyers see the true earning power of what you've built. Done wrong, they raise red flags and kill deals.

Take the time to understand your numbers. Use the right tools. And make sure your adjusted EBITDA tells a story that holds up under scrutiny—because when you're ready to sell, that story is everything.