EBITDA

Earnings before interest, tax, depreciation and amortisation — a rough proxy for operating profitability.

Example

Operating profit of $200k with $50k of depreciation gives EBITDA of $250k.

Important

Mostly irrelevant to an early startup and heavily used by later-stage buyers. If someone asks for it pre-revenue, they may not understand your stage.

Related terms

• Operating expenses (OpEx) — The costs of running the business that do not scale directly with each sale — salaries, rent, software, marketing, legal.
• Income statement (P&L) — A statement of revenue, costs and profit over a period. Revenue − COGS = gross profit; gross profit − OpEx = operating profit.
• Profitability — Making more than you spend over a period.

Lessons that explain it

• Reading an income statement — The P&L, top to bottom. Fifteen minutes and you will never be lost in an accountant's email again. (12 min)

All 176 terms in the Founder glossary