Earnings Before Interest, Taxes, Depreciation, and Amortization (EBITDA) is the primary valuation metric for business acquisitions. It represents the cash-generating power of the business independent of financing structure, tax strategy, and accounting methods.
For wholesale operators, EBITDA serves two purposes: valuing the business you're acquiring and pricing the deal for your buyer.
In business wholesale, you rarely have access to audited financials before making an initial offer. Automated valuation uses available signals to estimate EBITDA:
Revenue-Based Estimation
Estimated EBITDA = Revenue × Industry EBITDA Margin
Industry EBITDA margins vary widely:
Listing-Based Estimation Many business listings include asking price and revenue. From these, you can estimate:
Implied EBITDA = Asking Price / Industry Multiple
Implied Margin = Implied EBITDA / Revenue
If the implied margin is significantly above or below industry norms, it's a signal for further investigation.
Owner-operated businesses often have expenses that won't continue under new ownership:
Normalized EBITDA (after add-backs) is typically higher than reported EBITDA and is the appropriate basis for valuation.
Normalized EBITDA = Reported EBITDA + Add-Backs
Business Value = Normalized EBITDA × Industry Multiple
MAO = Business Value × (1 - Target Profit Margin) - Transaction Costs
The engine enforces minimum profit thresholds per deal size. Deals below threshold are auto-rejected.
Once a deal advances past preliminary valuation, automated due diligence checklists are generated:
The engine tracks due diligence completion and flags items that require additional investigation.