Free tool
Adjusted EBITDA calculator.
Reported profit is not what a business earns, and it is not what a lender or a buyer will work from. This rebuilds it line by line into adjusted earnings, and shows you the evidence each adjustment needs to survive. It stops at earnings: it applies no multiple and it does not price a business.
Adjusted EBITDA
417,000 dollars
The number a lender will test.
Total adjustments
232,000 dollars
Reported profit was $185,000.
A meaningful share of the earnings comes from adjustments. Each one needs a document behind it before a lender will adopt it.
Discretionary adjustments $116,000, or 27.8% of adjusted earnings. Interest, depreciation and amortisation are excluded from that share because nobody argues about them.
Adjustment schedule
This stops at earnings, on purpose. It does not price a business and it applies no multiple. What it gives you is the figure a credit team starts from. Feed it into the serviceability calculator to see what it services.
The adjustments
Eight lines, and what each one has to prove.
The arithmetic is easy. The evidence is the work, and it is the only reason a credit team accepts a number they did not calculate themselves.
| Adjustment | Direction | Evidence a lender wants |
|---|---|---|
| Interest | Add back | Loan statements reconciled to the profit and loss. Rarely contested. |
| Depreciation and amortisation | Add back | The fixed asset register, not just the tax schedule. Watch for assets that genuinely need replacing. |
| Owner's salary drawn | Add back | Payroll records and the ATO lodgements behind them. |
| Market salary for the role | Deduct | What it costs to hire a replacement. Skipping this is the most common way earnings get overstated. |
| One-off costs | Add back | Invoices proving the cost will not repeat. If it appears in all three years, it is not one-off. |
| One-off gains | Deduct | Asset sales and windfalls. Never trading earnings, however good the year looked. |
| Related-party rent paid | Add back | The lease, plus who controls the entity receiving the rent. |
| Rent at market | Deduct | What the premises cost at arm's length. The difference is an adjustment, not a saving. |
Interest
- Direction
- Add back
- Evidence a lender wants
- Loan statements reconciled to the profit and loss. Rarely contested.
Depreciation and amortisation
- Direction
- Add back
- Evidence a lender wants
- The fixed asset register, not just the tax schedule. Watch for assets that genuinely need replacing.
Owner's salary drawn
- Direction
- Add back
- Evidence a lender wants
- Payroll records and the ATO lodgements behind them.
Market salary for the role
- Direction
- Deduct
- Evidence a lender wants
- What it costs to hire a replacement. Skipping this is the most common way earnings get overstated.
One-off costs
- Direction
- Add back
- Evidence a lender wants
- Invoices proving the cost will not repeat. If it appears in all three years, it is not one-off.
One-off gains
- Direction
- Deduct
- Evidence a lender wants
- Asset sales and windfalls. Never trading earnings, however good the year looked.
Related-party rent paid
- Direction
- Add back
- Evidence a lender wants
- The lease, plus who controls the entity receiving the rent.
Rent at market
- Direction
- Deduct
- Evidence a lender wants
- What the premises cost at arm's length. The difference is an adjustment, not a saving.
A worked example
When most of the earnings come from adjustments.
Reported net profit of $92,000, presented to a lender as adjusted earnings of $399,000. The business may well be worth exactly that. The point is that 54.9% of the earnings case rests on adjustments, and every one of them will be tested.
Reported net profit
$92,000
What the accounts say.
Adjusted EBITDA
$399,000
What the file claims.
Total adjustments
+$307,000
The gap between the two.
Discretionary share
54.9%
Excludes interest and depreciation.
Most of the earnings case rests on adjustments rather than reported profit. Expect a credit team to test every line of this.
Add-backs that get struck out
- A one-off cost that appears in all three years
- Owner's salary added back in full, with no market rate deducted
- Vehicles and equipment the business genuinely needs to trade
- Wages for family members who actually do the work
- Marketing cut to the bone in the year before sale
- Anything with no invoice, statement or lodgement behind it
Where this stops
This gives you earnings, not a price.
We do not provide valuations and we do not act as business agents. This tool applies no multiple and produces no price, deliberately. Price is your territory, with your solicitor and your accountant. Our number tells everyone what they are pricing.
Buying the business these numbers belong to?
This calculator takes your word for every figure. Financial due diligence does the opposite: revenue reconciled to BAS lodgements and bank deposits, every vendor add-back reviewed against source documents, and a written verdict on which ones survive. Fixed fees from $2,500.
Common questions
An expense in the accounts that would not exist under a new owner, or that is not really a cost of trading. Owner's salary above market, a one-off legal bill, rent paid to the owner's own trust above market. Add them back and you get the earnings a buyer or a lender would actually see. The catch is that every one of them has to be true.
The ones with nothing behind them. A one-off cost that appears in all three years is not one-off. A vehicle that the business genuinely needs is not discretionary. Owner's salary added back in full, with no market rate deducted, overstates earnings every time. If a claim cannot be evidenced from source documents, assume a credit team will strike it out.
Because somebody has to do the work. Adding back what the owner drew without deducting what it would cost to replace them assumes the business runs itself. It does not, and a credit assessor knows it. The difference between the two is the real adjustment.
No, and it deliberately will not. It stops at adjusted earnings and applies no multiple. We do not provide valuations and we do not act as business agents. Price is your territory, and your solicitor's and your accountant's. Our number tells everyone what they are pricing.
That most of the earnings case rests on adjustments rather than reported profit. It is not automatically a problem, and plenty of good businesses look like this. It does mean a credit team will test every line, so the evidence needs to be ready before the file goes anywhere near a lender.
This calculator takes your word for each figure. Financial due diligence does the opposite: revenue reconciled to BAS lodgements and bank deposits, every add-back the vendor claims reviewed against source documents, and a written verdict on which ones survive. Fixed fees start at $2,500, priced by transaction value.
General information only. Not credit advice, not a credit assessment, and not an offer of finance. This tool does not provide a valuation and applies no multiple. Andorra Advisory Group does not arrange credit and is not a credit representative.