EBITDA might sound like something only accountants talk about, but it’s actually one of the most important figures when it comes to valuing your business.
Let’s demystify it.
What Is EBITDA?
EBITDA stands for Earnings Before Interest, Tax, Depreciation and Amortisation.
In simple terms, it shows your true operating profit — how your business performs day-to-day, before the impact of things like tax bills, loan repayments or one-off accounting items.
When valuing a nursery, dental practice or any healthcare business, EBITDA helps reveal its underlying profitability and earning potential.
Why It Causes Confusion
Mention EBITDA in a meeting and you’ll usually get one of two reactions:
- A confident nod from someone who’s heard it before, or
- A slightly nervous look from someone expecting to be quizzed on management accounts.
But don’t worry — EBITDA isn’t something to be scared of. It’s not a test, and you’re not expected to know how to calculate it yourself.
The Real Meaning Behind the Number
Your accounts are historical documents — they show what your business looked like months ago, not how it operates today. So, when we calculate EBITDA at Owen Froebel, we always take a few key steps to bring that information up to date.
We start with your latest accounts, then make adjustments to reflect the current picture, adding back things like:
- The use of your car or home
- One-off or discretionary expenses
- Other legitimate costs included by your accountant to minimise taxable profit
This gives us a clearer view of how your business is performing right now.
Why EBITDA Varies Between People
It’s important to remember that there’s no single ‘correct’ EBITDA.
Your accountant’s figure might differ from ours — and a buyer’s version might differ again. Each person adjusts the numbers based on how they view or intend to run the business.
For instance:
- A buyer might think they can reduce costs and improve margins.
- Another might believe they’ll need to add staff or increase spending.
That’s why EBITDA should always be seen as a guide — one that helps you and potential buyers speak the same financial language.
What Matters Most
As a seller, you don’t need to memorise formulas or jargon. What matters is understanding what EBITDA represents: the real, sustainable profit your business generates.
Our job at Owen Froebel is to walk you through every step — explaining what the numbers mean, updating them to reflect current conditions, and ensuring your valuation accurately reflects the strength of your business.
Because at the end of the day, EBITDA is simply a tool to show what your hard work is truly worth.
Thinking about selling your nursery or dental practice?
Our team can help you understand your numbers, identify hidden value, and prepare for a confident sale.
Get in touch to arrange a confidential chat:
www.owenfroebel.co.uk | 01788 545900 | info@owenfroebel.co.uk
