EBITDA Calculator

EBITDA formulas, with Excel and Google Sheets versions

Each result above comes from one of these formulas. The examples use the calculator's default numbers, which describe an illustrative SaaS company with $20,000,000 of revenue. The cell formulas work the same in Excel and Google Sheets.

B2 and B3 are subscription and services revenue, B4 cost of revenue, B5 to B7 sales and marketing, R&D and G&A, each with depreciation and amortization taken out. C2 is net income, C3 income tax expense, C4 interest expense, C5 interest income and C6 depreciation and amortization. D2 is operating income and D3 depreciation and amortization. E2 is EBITDA, E3 revenue, E4 stock-based compensation, E5 one-time costs, E6 revenue for the same period last year and E7 free cash flow. Format the margin and growth cells as percentages.

The three EBITDA rows give the same answer here because the inputs come from one set of books. On your own numbers they can differ, and the next sections explain why.

How to calculate EBITDA from a SaaS P&L, step by step

1. Pick one period. A fiscal year for the Rule of 40, or a quarter for a board update. Use recognized revenue from the income statement, not bookings, billings or ARR.
2. Find depreciation and amortization. On a GAAP income statement it is usually spread across cost of revenue and the operating lines. The total is on the cash flow statement, in the operating section.
3. Take it out of each cost line. Subtract each line's share of depreciation and amortization, so cost of revenue, S&M, R&D and G&A are all on a cash-like basis. If you cannot split it by line, subtract the total from the line that carries most of it and note that you did.
4. Work out gross profit. Revenue minus cost of revenue. In the example that is $15,800,000, a 79.0% gross margin.
5. Subtract operating expenses. Sales and marketing, R&D and G&A, which ORM's guide to SG&A expenses breaks down by line. Gross profit minus all three is EBITDA.
6. Check it from the bottom. Net income plus tax, plus interest expense, minus interest income, plus depreciation and amortization should match. If it does not, an item between operating income and net income is the gap.
7. Divide by revenue. That is EBITDA margin, the number you compare with peers and add to growth for the Rule of 40.

A monthly P&L that already keeps depreciation and amortization on its own line makes step 3 disappear. The free SaaS profit and loss statement template is built that way, with EBITDA and EBITDA margin calculated every month.

Why EBITDA from net income and from operating income can differ

The two routes match only when nothing sits between operating income and net income except interest and taxes. Most SaaS companies have other items there: interest earned on cash, foreign exchange gains and losses, changes in the value of investments or warrants. The net income route keeps those items in EBITDA. The operating income route leaves them out.

For public companies the SEC settles the question. Its staff guidance on non-GAAP measures defines "earnings" in EBITDA as net income as presented under GAAP, and says EBITDA used as a performance measure should be reconciled to net income, not operating income (SEC Non-GAAP Financial Measures C&DIs 103.01 and 103.02). For an internal board pack, pick one route, write it down and use it every quarter.

Watch interest income. A SaaS company sitting on a large cash balance after a raise can earn more interest than it pays. The "I" in EBITDA is net interest, so interest income comes out. Adding back only interest expense, and leaving interest income in net income, overstates EBITDA by the full amount of interest earned. In the default example that error turns $1,000,000 into $1,350,000.

What to add back, and what to leave in

EBITDA has a fixed definition. Adjusted EBITDA does not, so every add-back beyond interest, taxes, depreciation and amortization has to be named. The SEC asks that a measure with other adjustments carry a distinct title, such as "Adjusted EBITDA" (C&DI 103.01). These are the SaaS items that come up most.

Two checks keep adjusted EBITDA honest. Every add-back appears on a list with the dollar amount, so a reader can rebuild the number. And the list stays the same from quarter to quarter, so a better adjusted EBITDA reflects a better business, not a longer list.

Worked example with the calculator's defaults

The numbers are illustrative. A B2B SaaS company closes its fiscal year with $18,000,000 of subscription revenue and $2,000,000 of services revenue. Revenue last year was $16,000,000.

• Cost of revenue without depreciation is $4,200,000, so gross profit is $15,800,000, a 79.0% gross margin.
• Sales and marketing is $7,400,000 (37.0% of revenue), R&D $4,800,000 (24.0%) and G&A $2,600,000 (13.0%). Together they are $14,800,000.
• EBITDA is $15,800,000 - $14,800,000 = $1,000,000, a 5.0% EBITDA margin.
• Depreciation and amortization is $600,000, so operating income is $400,000. Net interest is $200,000 of income ($350,000 earned, $150,000 paid) and tax is $120,000, so net income is $480,000. Working back up from $480,000 gives the same $1,000,000.
• Stock-based compensation inside the cost lines is $1,400,000. Adjusted EBITDA is $2,400,000, a 12.0% margin.
• Revenue grew 25.0%. The Rule of 40 score is 25.0 + 5.0 = 30.0 on EBITDA margin, 37.0 on adjusted EBITDA margin and 34.0 on free cash flow margin ($1,800,000 is 9.0% of revenue).

The same company passes or fails depending on which margin it puts in the Rule of 40. That is the reason to show the definition next to the score. Free cash flow is higher than EBITDA here because customers pay annual contracts upfront, which brings cash in before revenue is recognized. ORM's guide to revenue vs profit walks through the full P&L from revenue to net income.

What is a good EBITDA margin for a SaaS company?

A good EBITDA margin depends on how fast you grow. A company growing 60% a year can run a negative margin and still pass the Rule of 40. A company growing 10% needs a 30% margin to pass. Read the margin together with growth, not on its own. A company whose revenue grows faster than its fixed cost base widens EBITDA margin every year without cutting anything, which is operating leverage at work.

The 26% median ARR growth rate comes from Benchmarkit's 2025 SaaS benchmarks, which use 2024 data. The same report puts median sales and marketing at 37% of revenue, R&D at 34% and G&A at 24%, against a 77% median gross margin. Medians of separate lines do not add up to a median P&L, so use them line by line to see which cost is out of line, not to build a target margin. ORM's glossary entry on operating margin covers the line just below EBITDA.

The Rule of 40 check

The Rule of 40 says a healthy SaaS company's revenue growth rate plus its profit margin should add up to 40% or more. Brad Feld wrote it up in February 2015 after hearing it from a late-stage investor, said it applies to companies at scale, and wrote that he prefers EBITDA as the profit baseline (Feld, The Rule of 40% For a Healthy SaaS Company). That is why this calculator scores it on EBITDA margin first.

Some investors use free cash flow margin instead, because EBITDA leaves out stock-based compensation, capitalized software and working capital. ORM's Rule of 40 formula entry makes the case for free cash flow, and what is a good Rule of 40 score covers how the bar moves with stage. The calculator shows all three versions so you can see how much the choice changes your score. Use year-over-year revenue growth for the same period, not one quarter annualized, which inflates the score. The growth rate calculator handles the growth half if your periods do not line up.

EBITDA vs gross profit, operating income and net income

Net income is above operating income in the example because the company earns more interest on its cash than it pays on its debt. For most SaaS companies EBITDA and operating income sit close together, because software companies own few physical assets. The gap widens after an acquisition (amortized intangibles) or when a lot of engineering cost is capitalized. For which growth levers reach which of these lines, see top line vs bottom line.

How EBITDA is used to value a company

Buyers and lenders often price a profitable company as a multiple of EBITDA: enterprise value divided by EBITDA. In Aswath Damodaran's January 2026 data for US public companies with positive EBITDA, the multiple was 19.73 for the total market and 24.48 for system and application software. Those are public-market averages; a single private company can sell for well above or below them.

Growth-stage SaaS is usually valued differently. A company that reinvests everything in growth can have small or negative EBITDA, so a multiple of EBITDA says little. Investors look at ARR or revenue multiples and at growth and efficiency together, which is where the Rule of 40 comes back in. Once growth slows and margins become the story, as at many private-equity-owned software companies, EBITDA becomes the number the valuation rests on.

What Pete Furseth sees when EBITDA becomes the target

Pete Furseth, ORM's COO, works with B2B SaaS revenue and finance teams on forecasts, capacity and plans. These points change how an EBITDA number should be read.

• Cost cuts come with a revenue cost. When rates rise and private equity firms slow down, valuations fall and companies cut costs to increase earnings. Pete has seen fewer companies buy at the same time, so win rates fall. A plan that raises EBITDA by cutting sales and marketing should also lower the bookings forecast.
• A sales hire costs EBITDA long before it adds revenue. In B2B SaaS, Pete generally sees reps take 15 to 18 months to become fully productive. A rep hired this year lowers this year's EBITDA margin and pays back in the next one.
• Better capacity planning is an EBITDA lever. In the models ORM builds, optimized capacity planning can reduce sales costs by about 10% to 15% for the same revenue target, and a two-year capacity plan instead of a one-year plan can reduce cost by roughly 5%.
• Price is part of the plan. Pete sees price increases come up most often when a new private equity owner gets involved, if the market will bear it. A price change moves EBITDA with no change in cost, so model it as its own line.
• The same number on every slide. "If you show one number on one slide, that number better show up on the next, or there should be a clear explanation for why it changed." EBITDA, adjusted EBITDA and the Rule of 40 should use one definition through the whole board pack.

Common EBITDA mistakes

• Adding back interest expense but keeping interest income. It inflates EBITDA by the interest earned. Use net interest.
• Leaving depreciation inside the cost lines. Top-down EBITDA then subtracts depreciation and comes out equal to operating income.
• Calling adjusted EBITDA "EBITDA." Once stock-based compensation or one-time costs are added back, label it adjusted and list the items.
• Adding back capitalized commission amortization. It is the selling cost of the contracts you signed. Taking it out flatters sales efficiency.
• Using bookings or ARR as revenue. EBITDA margin divides by recognized revenue for the same period.
• Treating EBITDA as cash. It ignores capital spending, capitalized software and working capital, such as invoices customers have not paid yet (the DSO calculator measures how many days of billings sit in receivables). For cash, look at free cash flow and runway in the burn rate calculator, and plan it month by month in the cash flow forecast template.

ORM's take on EBITDA and next year's forecast

EBITDA tells you what last year's revenue and costs added up to. The decisions behind next year's margin are about revenue: how many reps to hire and when, how much pipeline they will close, and how fast. Get the revenue forecast wrong and the cost plan built on it is wrong too.

That is what ORM forecasts. We build bookings and ARR forecasts from your own CRM data, with a low case, an on-target case and an upper bound, and tie them to the capacity plan that drives your largest cost line. ORM targets 95% accuracy on the forecasts it builds. For the full P&L behind this number, use the profit and loss statement template.

Common questions

How do I calculate EBITDA from revenue?

Start with revenue and subtract cost of revenue to get gross profit. Then subtract operating expenses (sales and marketing, research and development, general and administrative), with depreciation and amortization taken out of every line. What is left is EBITDA. With $20,000,000 of revenue, $4,200,000 of cost of revenue and $14,800,000 of operating expenses, EBITDA is $1,000,000.

Is EBITDA the same as gross profit?

EBITDA and gross profit are different lines. Gross profit is revenue minus cost of revenue, so it only covers the cost of delivering the product. EBITDA also subtracts sales and marketing, R&D and G&A. In Benchmarkit's 2025 SaaS benchmarks the medians for those three were 37%, 34% and 24% of revenue, so EBITDA sits far below gross profit and is negative at many growth-stage companies.

How many times EBITDA should a business sell for?

It depends on the industry, growth and size. In Aswath Damodaran's January 2026 data for US public companies with positive EBITDA, enterprise value was 19.7 times EBITDA across the market and 24.5 times for system and application software. Fast-growing SaaS companies with little or negative EBITDA are usually valued on revenue or ARR instead.

Can EBITDA be a percentage?

EBITDA itself is a dollar amount. Divided by revenue, it becomes EBITDA margin, which is a percentage. $1,000,000 of EBITDA on $20,000,000 of revenue is a 5.0% EBITDA margin. The margin is what you compare across companies of different sizes, and it is the profit half of the Rule of 40 in its original form.

What is adjusted EBITDA?

Adjusted EBITDA is EBITDA with more items added back, most often stock-based compensation and one-time costs such as a restructuring or acquisition fees. Every company picks its own adjustments, so two adjusted EBITDA figures are rarely comparable. The SEC says a measure with extra adjustments should not be called EBITDA and needs a distinct name, such as Adjusted EBITDA.

Is stock-based compensation added back to EBITDA?

Standard EBITDA leaves stock-based compensation in, because it is part of the operating expenses on the income statement. Adding it back produces adjusted EBITDA. Many SaaS companies report both. Show the two side by side and say which one the plan uses, because at a company that pays a large share of compensation in equity the gap can be several points of margin.