Free calculator · Due diligence
Calculate adjusted EBITDA: what are your earnings really worth?
From reported to adjusted EBITDA: owner-manager salary, market rent, one-off items and private expenses as add-backs, with a quality traffic light and valuation impact. Live as you type. No sign-up, and no data is sent to my server.
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Enter all euro amounts in €m (e.g. 2 = €2m). The exact amount is shown below each field. * = required field.
Starting point
Owner-manager compensation
Related-party rent
One-off items (kept separate)
Other adjustments
Valuation impact (optional)
Aggressive adjustments: review closely
Add-back ratio 52.5% · Gross adjustments €1.1m
Adjusted EBITDA
€2,310,000Reported €2,000,000 · Net effect +€310,000
Adjustments
Calculates entirely in your browser. Nothing leaves this page.
Bridge: reported EBITDA → adjusted EBITDA
Navy = anchor. Green = add-back, red = deduction.
Adjustments in detail
| Reported EBITDA | €2,000,000 |
| Normalisation of owner-manager compensation (actual less market) | €350,000 |
| Normalisation of related-party rent (actual less market rent) | -€120,000 |
| Non-recurring costs (add-back) | €180,000 |
| Non-recurring income (deduction) | -€250,000 |
| Private / non-business expenses (add-back) | €90,000 |
| Other normalisations (signed) | €60,000 |
| Adjusted / normalised EBITDA | €2,310,000 |
How EBITDA normalisation works
The starting point is reported EBITDA. Effects that are not sustainable are then corrected, either upwards (add-back) or downwards (deduction):
Adjusted EBITDA = reported + (mgmt pay actual−market) + (rent actual−market) + one-off costs − one-off income + private ± other
Owner-manager compensation is normalised against the full cost of an external managing director, and rent paid to related parties against the local market rent. Non-recurring costs (litigation, restructuring) are added back and non-recurring income (book gains, release of provisions) is deducted, deliberately kept separate and never netted. Private expenses run through the company increase adjusted EBITDA.
The add-back ratio measures how far the result depends on adjustments, and a high value is a quality signal for due diligence. With a valuation multiple, the calculator also shows how much company value lies in the normalisation.
Worked example
A company reports EBITDA of €2.0m. The owner pays themselves €0.6m instead of a market-rate €0.25m (add-back +€0.35m). The operating warehouse is held rent-free in the owner's private assets, and market rent of €0.12m will be payable in future (deduction −€0.12m). Non-recurring costs of €0.18m are added back, non-recurring income of €0.25m is deducted, plus €0.09m of private expenses and €0.06m of other items. The net effect is +€0.31m, so adjusted EBITDA is around €2.31m (margin 16.7% → 19.3%). At a 7× multiple, that is a value lever of around +€2.17m (EV €14.0m → €16.2m). The gross adjustment volume of €1.05m gives an add-back ratio of 52.5%, so the traffic light is red: a buyer will ask for evidence of every item.
Model logic and simplifications
Owner-manager compensation and rent carry their own sign (actual − market). Non-recurring costs and income are kept strictly separate, as netting them is the most common source of QoE errors. The add-back ratio measures the gross volume of all adjustments, because adjustments that reduce earnings also require review. A deliberate distinction from the EV to equity bridge: a non-operating property is a surplus asset there, while here only the ongoing rent effect is normalised, not the value of the asset. Which add-backs a buyer actually accepts is a matter of negotiation and part of the financial due diligence.
Want your EBITDA properly prepared before a sale?
I support transactions in the DACH Mittelstand, from preparing the figures and the valuation through to closing, discreetly and with proprietary access.
Confidential initial callFurther reading
- Calculate company value: adjusted EBITDA as the basis of the valuation
- Due diligence: how the buyer reviews the add-backs (quality of earnings)
- EV to equity bridge: from enterprise value to equity value
- Glossary: EBITDA, adjusted EBITDA, quality of earnings and more explained
Note
This calculator is for non-binding guidance only and does not constitute financial, tax or legal advice. The results are based on a simplified QoE-light model using the values you entered and do not replace financial or quality of earnings due diligence. Which add-backs a buyer accepts is a matter of negotiation. I accept no liability for accuracy, completeness or timeliness.
Frequently asked questions
What is EBITDA normalisation (adjusted EBITDA)?
Normalisation adjusts reported EBITDA for effects that are not sustainable, not at market rates or one-off, so that it shows the sustainable earnings power. Typical add-backs in the Mittelstand: owner-manager compensation above market level, private expenses run through the company, rent paid to related parties that is not at market rates, and one-off items. The resulting adjusted EBITDA is the basis to which the buyer applies their valuation multiple.
How is managing director compensation normalised?
What matters is the difference between the actual compensation of the owner-manager and the full market cost of an employed external managing director. If the owner pays themselves more than the market rate, the difference is added back to EBITDA, because a buyer only has to carry this item at market level. If the compensation is below market, for example because the owner pays themselves very little, it is deducted, because a managing director paid at market rates will be needed in future.
What is a high add-back ratio and why is it a warning sign?
The add-back ratio sets the gross adjustment volume (the sum of all adjustment amounts) against reported EBITDA. The higher the ratio, the more adjusted EBITDA depends on assumptions, and the more critically a buyer will examine it in due diligence. As a rough guide: up to around 10% is unproblematic, up to 25% is elevated, and above that it is aggressive. The calculator shows the ratio and a traffic light; it is a signal, not a verdict.
How does normalisation affect the purchase price?
The purchase price is usually negotiated as a multiple of EBITDA. Every euro of sustainable add-back increases adjusted EBITDA and, multiplied by the valuation multiple, directly increases the enterprise value. At a multiple of 7×, an add-back of €0.3m increases the enterprise value by around €2.1m. That is exactly why a clean, well-documented normalisation pays off before a sale.
Is the calculator free and confidential?
Yes. The calculation runs entirely in your browser and no inputs are sent to a server. You can enter real figures from your management accounts (BWA) without them leaving the page. The calculator can be used without registration; you only need an email address for the optional PDF delivery.