EBITDA stands for earnings before interest, taxes, depreciation, and amortization.
In simple terms, it is a way of measuring how much profit your agency generates from its core operations, before accounting for financing decisions, tax structure, or non-cash accounting items.
This allows buyers to evaluate the business on a consistent basis, regardless of how the current owner has structured it financially.
Adjusted EBITDA goes a step further by normalizing your financials to reflect the true ongoing profitability of the agency.
This is critical because most agency financials include expenses that are specific to the current owner and may not continue after a sale.
Buyers use adjusted EBITDA to answer a simple question:
“What would this business earn under normal ownership?”
This normalized number is then used in combination with valuation multiples to determine the agency’s value.
Add-backs are adjustments made to your reported profit to arrive at adjusted EBITDA. These should be reasonable, clearly documented, and defensible.
Common add-backs include:
The key principle is simple: if the expense will not continue after the sale, it may qualify as an add-back.
Not every add-back is accepted.
Buyers will push back on anything that appears to be required to operate the business, including:
If add-backs are overly aggressive, it can damage credibility during due diligence and slow down or derail the deal
Two agencies with identical EBITDA can have very different values.
This is because buyers also evaluate:
See the full breakdown here: Valuation factors.
EBITDA tells you how much profit exists. It does not tell you how reliable that profit is.
Once adjusted EBITDA is established, buyers apply a multiple to estimate value.
For example:
But the multiple depends heavily on risk and quality — not just the EBITDA number itself.
Learn more: Valuation multiples.
Strong, stable EBITDA increases buyer confidence.
This can lead to:
Weaker or volatile EBITDA may lead to more conditional payments or risk-sharing structures.
Learn more: Deal structure.
If you are preparing for a sale, improving EBITDA can significantly impact your outcome.
Key areas include:
See: How to prepare your agency for sale
Freshy evaluates EBITDA in context — not just as a number.
We look at:
A slightly lower EBITDA that is stable and transferable is often more valuable than a higher EBITDA that is fragile or dependent on the founder.
We can help you evaluate your financials the way a buyer would — including add-backs, normalization, and valuation impact.
Request a confidential valuation review
A normalized measure of profitability that reflects true ongoing earnings.
It allows consistent comparison across businesses.
Expenses removed to reflect normalized profit.