What is normalised EBITDA and why do buyers adjust it?
Short Answer
Normalised EBITDA restates reported earnings to remove one-off items and owner-specific costs, showing the sustainable earning power a buyer would inherit. Buyers adjust it because the multiple is applied to this figure, so it sets the price.
Full Explanation
Normalised EBITDA, also called adjusted EBITDA, is the number a business is really valued on. Reported earnings include things that will not recur under new ownership: an above-market owner's salary, personal costs run through the business, exceptional legal or restructuring costs, and the effect of non-market related-party arrangements. Normalising strips these out — and removes genuine one-offs — to show the earnings the business will actually generate for a buyer. Because a business is typically valued as a multiple of normalised EBITDA, each adjustment changes the price directly: a defensible add-back can be worth several times its face value once the multiple is applied. Buyers scrutinise every adjustment in a quality of earnings review, so a seller needs evidence for each one, not just an assertion. Presenting a clean, well-supported normalised EBITDA — ideally backed by your own vendor analysis before you go to market — is among the most valuable preparation an owner can do. See [business sale valuation](/insights/what-is-my-business-worth-to-a-buyer) and the [normalised EBITDA](/intangibles/glossary/normalised-ebitda) definition.
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