EBITDA Defined

EBITDA before recast numbers is your earnings, before interest expense, taxes, depreciation and amortization.

Recast adjustments may include the following:

  • rents that are paid to you at rates above market
  • salaries that are paid to you or others that are above market levels
  • payroll taxes that relate to the above salary adjustments
  • sales that are anticipated from locations, including routes, that have not yet been opened for a full year
  • price increases that have not yet been implemented for a full year
  • professional fees that will not be continued by a new owner
  • office staff and related expenses that will not be needed by a new owner
  • non-reoccurring expenses (one time, unusual items)
  • major expenses that would normally have been depreciated over longer periods

EBITDA after adjustments is EBITDA before recast plus / minus all recast adjustments

Valuation Multipliers

Historically, in this industry a multiplier of 3 to 5 times EBITDA is used to determine a business’ value. At times a multiplier of less than 2, or 6 or more (as when national IPOs are attempted) may be available. The range is dependent on a number of variables including:

  • sales growth
  • strength of operating management,
  • strength of locations,
  • type of solvent in use
  • age of equipment
  • length of leases
  • contamination issues
  • equipment and building capacity
  • wholesale volume
  • pricing

Valuation Formulas

Everyone uses something different, but a good starting point is

EBITDA recast X Multiplier = Value

If you’d like more detail about your specific business, contact us and someone will be able to work with you on a private and very confidential basis.