EBITDA

Earnings Before Interest, Taxes, Depreciation, and Amortisation: the profit measure buyers use for businesses that run under professional management rather than an owner-operator.

EBITDA strips financing and accounting charges out of profit to show what the operations themselves earn. Unlike SDE, it does NOT add back a manager's salary, because the buyer of a management-run business expects to pay a manager, not to be one.

The line between the two measures matters for owner-operated businesses approaching a sale: buyers using SDE are buying a livelihood, buyers using EBITDA are buying an investment, and EBITDA buyers generally pay higher multiples for lower-risk, self-running operations. Moving from "priced on SDE" to "priced on EBITDA" usually means the business demonstrably runs without its owner, which is the theme of owner independence.