Adjusted EBITDA Margin

Formula

(Net income + Interest + Taxes + Depreciation + Amortization + Adjustments) ÷ Revenue × 100

Why Track It

EBITDA is what the business actually earns and what buyers multiply to value it. It is the check that growth, pricing and staffing decisions are paying off together.

How It Is Measured

From the income statement, take net income and add back interest, taxes, depreciation and amortization. Add back one-time items and normalize owner compensation to a market salary. Divide by total revenue for the period. Report trailing twelve months, and keep a written list of the adjustments so the number stays comparable.

Constraints

Adjustments are judgment calls, and generous add-backs make any MSP look healthy. It lags operating problems by a quarter or more.

Referenced In

• How Much Is My MSP Worth?AnswerRead
• What Gross Margin Should I Target?AnswerRead
• EBITDAGlossary TermRead

Related KPIs

• Recurring Revenue as Share of TotalThe percentage of total revenue that comes from recurring agreements rather than projects, product resale and hourly work.Read
• Gross MarginTotal revenue minus the direct cost of delivering it (technician labor, tools, resold product), as a percentage of total revenue.Read
• Service Multiple of WagesService revenue earned for every dollar paid in service delivery wages.Read
• Days Sales Outstanding (DSO)The average number of days it takes to collect payment after invoicing.Read
• Service Revenue per EmployeeAnnual service revenue divided by total headcount, a single measure of pricing, productivity and staffing combined.Read