11 Jun Is EBITDA Really King When Valuing Your Business?
Q&A with David & Jay
Answer:
If you are preparing to sell or value your company, you have likely heard the common industry mantra: EBITDA is King.
While this metric (Earnings Before Interest, Taxes, Depreciation, and Amortization) is undeniably important, focusing on it exclusively might mean leaving money on the table. Here is why revenue growth can actually be the ultimate driver of your business’s value.
The Role of EBITDA in Valuation
It is true that EBITDA is widely used across industries. It serves a very specific purpose: creating a level playing field. By stripping out the variables of financing, accounting, and tax environments, buyers and investors can accurately compare the operational profitability of several similar businesses. Because of this, it is a foundational element in any standard business valuation.
Why Revenue Growth Often Steals the Crown
However, while EBITDA shows current operational health, revenue growth signals future potential—and buyers pay a premium for the future.
Consider the public markets: we frequently see publicly traded tech companies or disruptive startups achieve massive, market-leading valuations based entirely on their fast-paced revenue growth, even if they currently have zero earnings. Growth proves market demand and scalability, which can quickly overshadow baseline profitability.
The “Active Owner” Premium
This dynamic highlights a crucial lesson for founders and CEOs: Your business reaches its highest value when you are actively engaged in driving results. An owner who is aggressively pursuing new markets, optimizing sales, and pushing top-line growth will command a much higher multiple than an owner who has effectively “retired in place,” content to simply maintain their current EBITDA.
The Bottom Line:
EBITDA proves your current stability, but top-line revenue growth proves your future potential—and buyers pay a premium for the future.
During the 2025 Managing and Accounting Practice (MAP) Conference hosted by the Massachusetts Society of CPAs (MassCPAs), Beacon Equity Advisors’ David Humphrey and Jay Galasso presented an AMA (Ask Me Anything) to the CPA firm partners attending. In this Q&A series, Beacon publishes some of those questions to help business owners make important decisions about the future of their company.