Difference between turnover, profit and EBITDA
A large turnover can hide a weak business, while a smaller business with stable profit can be more attractive. Buyers need to compare the right number.
Turnover
Turnover is total sales before expenses. It shows scale and customer demand, but it does not show how much money is left for the owner.
Fuel retail, wholesale and logistics can have high turnover and thin margins, so turnover alone can mislead buyers.
Gross profit
Gross profit is sales less direct cost of goods or direct service delivery. It shows whether the business has pricing power and cost control.
Compare gross margin over several periods to see whether discounts, input costs or shrinkage are eating into returns.
Net profit
Net profit is what remains after operating expenses. For owner managed businesses, rebuild it after a market related owner salary and careful add back review.
EBITDA
EBITDA means earnings before interest, tax, depreciation and amortisation. It helps compare operating earnings before financing and accounting choices.
For small businesses, EBITDA still needs buyer judgement because owner dependence, leases and customer concentration do not appear in the number.
How to compare listings
Use turnover to understand scale, profit to understand cash generation, and EBITDA to compare operating performance. Never pay a profit multiple on turnover.
Next step
Filter listings by profit as well as price.
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This guide is general information, not legal, tax, accounting, finance or investment advice.