Calculate EBITDA from revenue, COGS, and operating expenses — plus EBITDA margin, EBIT after depreciation, and implied valuation at a given EBITDA multiple.
EBITDA (Earnings Before Interest, Taxes, Depreciation, and Amortization) is the most
widely used metric for comparing operational profitability across companies and capital
structures.
EBITDA is popular because it removes the distortion from:
- Capital structure (interest payments differ by how much debt a company carries)
- Tax jurisdiction (tax rates vary by country and structure)
- Capital intensity (depreciation depends on asset base, not operations)
This makes it easier to compare a software company (low D&A) with a manufacturing
company (high D&A) on an apples-to-apples operational basis.
EBITDA margin benchmarks
Industry
Typical EBITDA margin
Software / SaaS
15–40%
B2B services
10–20%
E-commerce
5–15%
Healthcare
10–25%
Manufacturing
8–15%
Retail
3–8%
High-margin SaaS businesses at scale can achieve 30–40%+ EBITDA margins.
Early-stage SaaS typically runs at negative EBITDA while investing in growth.
EBITDA multiples and valuation
Enterprise value (EV) is commonly expressed as a multiple of EBITDA:
A company with $1.5M EBITDA at a 10× multiple has an implied EV of $15M.
Limitations of EBITDA
EBITDA can be misleading when:
- CapEx is high (D&A excluded, but real capital spend remains)
- Working capital is negative (growth companies often have negative working capital)
- Non-recurring items are buried in operating expenses
Warren Buffett famously criticized "EBITDA earnings" as a management tool for
obscuring real economics. Use it for comparison and benchmarking, not as a
substitute for cash flow analysis.
Frequently asked questions
What does this calculator do?
Calculate EBITDA, EBITDA margin, EBIT after depreciation/amortization, and
implied enterprise valuation from revenue and cost components.
EBITDA Explained: A Plain-English Guide for Startup Founders
EBITDA is the financial metric investors use most to evaluate business profitability. This guide explains what it is, how to calculate it, and what EBITDA margin your business should target.
EBITDA is one of those financial acronyms that sounds intimidating but is actually
straightforward once you break it down.
It's the money your business generates from operations — before financing costs,
tax obligations, and non-cash accounting entries.
Why investors care about EBITDA
Investors use EBITDA to compare businesses that might have:
- Different amounts of debt (affecting interest payments)
- Different tax structures (affecting net income)
- Different asset bases (affecting depreciation)
Stripping these out gives a cleaner picture of operational performance.
A simple example
A software company at $5M ARR:
- Revenue: $5,000,000
- COGS (hosting, support): $750,000
- S&M payroll: $1,500,000
- G&A: $500,000
- R&D payroll: $750,000
- EBITDA: $1,500,000 (30% margin)
Compare that to a services company at $5M revenue with 60% cost structure:
EBITDA of $500,000 (10% margin). Same revenue, very different profitability.
When you have negative EBITDA
Negative EBITDA isn't necessarily bad for startups. Most VC-backed SaaS
companies run negative EBITDA in the early years while investing heavily
in growth. Investors evaluate the trajectory toward profitability.
The question isn't "is EBITDA positive?" but "can this business become
profitable at scale, and when?"
EBITDA margin benchmarks across software, services, e-commerce, healthcare, and manufacturing. Use these to benchmark your business and understand what investors expect.
EBITDA margin benchmarks vary significantly by industry. A 15% EBITDA margin
is excellent for a retailer but mediocre for a mature SaaS company.
SaaS and software
Stage
EBITDA margin range
Pre-revenue / early stage
Negative (investing in growth)
$1M–$10M ARR
-20% to +10%
$10M–$50M ARR
0% to 20%
$50M–$200M ARR
15% to 30%
$200M+ ARR (mature)
25% to 40%
The "Rule of 40" states that growth rate + EBITDA margin should equal at
least 40 for a healthy SaaS business.
Professional services and consulting
Typical range: 10–25% EBITDA margin.
Pure consulting (low fixed costs) can achieve 20–30%. Agency models with
high headcount and overhead typically land at 10–15%.
E-commerce
Typical range: 5–15% EBITDA margin.
Gross margins are lower (30–50% for branded e-com), and marketing spend
is high. Brands with strong direct relationships and low CAC achieve the
upper range.
Healthcare
Typical range: 8–25% depending on sub-sector. Healthcare tech (EHR, practice
management software) achieves 15–30%. Clinical practices run 8–15%.
Manufacturing
Typical range: 5–15%. Capital-intensive. Higher margins at premium brands
with proprietary products; lower for commodity manufacturing.
EBITDA Multiples for SaaS Valuation: What the Numbers Mean
How EBITDA multiples are used in SaaS valuation, what multiples to expect at different growth rates and margins, and how to use your EBITDA to estimate enterprise value.
Enterprise value (EV) is the total value of a business — what an acquirer would
pay. For mature businesses, EV is often expressed as a multiple of EBITDA.
Enterprise Value = EBITDA × Multiple
Why SaaS uses ARR multiples, not EBITDA multiples
Early-stage SaaS typically has negative or near-zero EBITDA. Valuing a $2M ARR
startup at 10× EBITDA when EBITDA is -$500k would give a negative valuation —
clearly wrong.
So early-stage SaaS uses ARR multiples: typical range 5–15× ARR for
growth-stage companies.
Once a company crosses into profitability (EBITDA > 0), acquirers and
later-stage investors switch to EBITDA multiples.
EBITDA multiple ranges by profile
Business profile
EBITDA multiple range
High-growth SaaS (40%+ ARR growth)
15–25× EBITDA
Growth SaaS (20–40% ARR growth)
8–15× EBITDA
Profitable SaaS (< 20% growth)
5–10× EBITDA
Professional services
4–8× EBITDA
B2B services / consulting
3–6× EBITDA
Manufacturing
3–5× EBITDA
What drives a higher multiple
Revenue growth: Faster growth commands a higher multiple.
NRR > 110%: Strong retention and expansion signals durable economics.
If you're targeting an exit at $20M EV in 3 years, work backwards:
- At 8× EBITDA: need $2.5M EBITDA
- At 10% EBITDA margin: need $25M revenue
- At your current growth rate: is $25M revenue achievable in 3 years?
Use the EBITDA Calculator to model your
current EBITDA and implied valuation range.