Adjusted EBITDA

DefinitionAdjusted EBITDA is EBITDA restated to reflect the true, ongoing earning power of a business. It removes one-time, non-operating, and owner-specific items — a lawsuit settlement, an above-market related-party rent, a founder’s personal expenses — so a buyer can underwrite the business on what it will actually earn going forward. Each adjustment is a judgment call, and each one changes the price, so a defensible deal is one where every adjustment is documented and verified rather than asserted.