Inputs
Pull these straight from the trailing twelve-month P&L.
Trailing twelve months of revenue.
Bottom of the P&L, after taxes.
Interest only. Don't include principal.
Income taxes. Exclude payroll and sales tax.
Depreciation of trucks, equipment, buildings.
Amortization of acquired intangibles, if any.
How to use it
EBITDA is Earnings Before Interest, Taxes, Depreciation, and Amortization. You get there by taking net income from the P&L and adding back the four items above the line.
- Use the trailing twelve months. Not calendar year, not budget. Most buyers price off LTM.
- Pull interest and taxes from the P&L. Don't net anything.
- Separate D from A. Depreciation is for tangible assets; amortization is usually for acquired intangibles.
- If you're owner-operated, you probably want SDE. Add owner compensation back and run the SDE calculator.
What it returns
Three outputs:
- Your EBITDA number and the margin it implies on revenue.
- A build-up so a buyer or lender can see how you got there.
- A low / mid / high value range using typical home-services multiples. Narrow it with the multiples lookup and your actual trade.
The number here is unadjusted. If you've got owner compensation, personal expenses, or one-time items in the P&L, run them through the adjusted EBITDA tool next.
How this tool works
EBITDA stands for Earnings Before Interest, Taxes, Depreciation, and Amortization. The calculator takes net income from the trailing twelve months and adds the four items above the line.
We use trailing twelve months because that's what the overwhelming majority of lower middle-market buyers and lenders price on. Fiscal-year or budget-year numbers rarely survive diligence.
The implied value range uses three EBITDA multiples (4×, 5.5×, 7×) that bracket the typical range in home services. For a sharper read, use the multiples lookup, or benchmark your EBITDA margin on the EBITDA benchmarker.
If a single owner takes meaningful compensation out of the business, EBITDA understates the real earnings power. Use SDE for owner-operated deals (see SDE vs. EBITDA), and adjusted EBITDA for anything larger.
Sources
- IRS Publication 946 — depreciation guidance · Internal Revenue Service
- Axial — M&A activity in home services · Axial Networks
See also on mainstreetwealth.ai
Frequently asked questions
What's the difference between EBITDA and adjusted EBITDA?
Which multiple should I use for my business?
Is EBITDA the same as cash flow?
How many years of financials do buyers want to see?
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