How plants compute the number
Start with operating income or with net income and walk back. Add interest the capital structure created, income tax, depreciation on the iron, and amortization of intangibles. Do not add the owner’s truck, the lodge, or a flood. Those fights belong to adjusted EBITDA and the add-back schedule.
Depreciation on a press is real economic wear even if the accountant’s life does not match the spindle hours. EBITDA ignores that wear on purpose so buyers can compare shops with different tax elections. It does not mean the rebuild fund is optional.
What EBITDA is not allowed to hide
It is not cash available to pay a note. A plant can print a clean EBITDA line and still need a spindle rebuild, a plating-line baghouse, and a working-capital true-up in the same quarter. Federal Reserve G.17 printed manufacturing capacity utilization at 76.0% in the August 2026 release — a national utilization print, not a license to skip capex in the model (Source: Federal Reserve G.17).
ISM’s August 2026 Manufacturing PMI of 54.6 described expansion with cost pressure (Source: ISM). Neither print moves a file from SDE to EBITDA. The buyer type and the replacement-manager question do.
| Earnings label | Owner pay | Typical room |
|---|---|---|
| SDE | Added back | Individual, many 7(a) files |
| Reported EBITDA | Whatever hit the P&L | Internal scorecards |
| Adjusted EBITDA | Market GM already in | Searchers, sponsors, funds |
Why does a glossary page refuse a multiple here?
Because multiples attach to a named base and a size band. BizBuySell’s 2.75x manufacturing median sits on SDE for Main Street sold files (Source: BizBuySell). Pasting that median onto an EBITDA stack is how sellers invent enterprise value. Valuation keeps the bands. This definition only names the letters.
Handoff after the letters are straight
Open the owner if you are choosing a base. Open adjusted EBITDA if the fight is the schedule of normalizations. Open the FAQ if you typed a question instead of a noun. Jason Taken is a business broker. Educational information only. A CPA builds the bridge from tax returns to the CIM.
How plants misuse the letters in a CIM
They add back the owner and still call the line EBITDA. They ignore a family member on the floor at below-market wages. They treat depreciation as “optional” because last year they skipped the rebuild. They compare their number to BizBuySell’s SDE median and call the stack “conservative.” Each of those is a category error.
A clean reported EBITDA on a shop that still needs a $400,000 spindle program is a starting point, not a finish. Capex belongs in the model even when it is not in the acronym. The glossary exists so EBITDA and SDE do not share an H1. When the noun is settled, book a confidential intro call if the file is real.
Where reported EBITDA is still useful
Internal scorecards. Month-end packs. A controller who needs a number that matches the P&L before anyone argues add-backs. Reported EBITDA is a language for operations. It is a terrible language for a CIM headline on an owner-operated shop.
If you publish reported EBITDA, publish the owner’s W-2 next to it. Readers can do the math. Hiding the W-2 is how “$1.1 million EBITDA” becomes a $1.1 million argument. SDE versus EBITDA for manufacturers still decides the base. This section only keeps the letters honest in the first attachment.
Capex the acronym pretends not to see
A plant can print a handsome EBITDA line in a year it deferred every spindle rebuild. That is not a mystery. Depreciation is in the acronym because accountants spread the old iron. The cash to replace the iron is not in the acronym. Write a capex schedule next to the EBITDA number or you have handed the buyer a reason to distrust every other page.
Searchers will build that schedule anyway. Individuals who are new to plants may not. Do them the courtesy of naming the next two rebuilds and whether they are already quoted. The owner comparison still decides SDE versus EBITDA. This paragraph only keeps cash from hiding inside four letters.
How a CIM should print the letters without lying
Report the letters, then report the owner’s W-2, then report whether a replacement manager is already in the trailing twelve. Readers who have those three facts will not need a fourth meeting to learn what the number is. Bring the tax returns and the W-2 to the first serious call if you want that conversation to be short. SDE versus EBITDA for manufacturers still decides the base. After the letters are honest, a confidential intro call is the conversion path.