EBITDA stands for earnings before interest, taxes, depreciation and amortization, a measure of a company's operating profit before financing and accounting decisions are factored in. It is the standard metric for valuing larger businesses with a management team in place, while smaller owner-operated businesses are usually valued on SDE instead, since EBITDA does not add back a single owner's salary and perks.
Why it matters
Whether a buyer values your business on EBITDA or SDE depends on whether it can run without you.