What is EBITDA?
EBITDA (Earnings Before Interest, Taxes, Depreciation, Amortization) is operating profit before interest, taxes, depreciation, and amortization. A comparable "operating profit" proxy.
Formula
Example
If monthly revenue is $25K, COGS $10K, ads $4K, wages $3K, software $1K → EBITDA = $25K − ($10K + $4K + $3K + $1K) = $7K (28% EBITDA margin)
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Related Terms
Net Margin
Net margin is the profit percentage remaining after all costs (COGS, ads, shipping, operations). The e-commerce median is just 3% — every percentage point matters.
Net Profit
Net profit is total revenue minus all costs (COGS, ads, shipping, wages, taxes, everything). The "true" bottom line — what's actually left.
Contribution Margin
Contribution margin shows how much a product "contributes" toward covering fixed costs after all variable costs are deducted. The evolved version of margin.
Cash Flow
Cash flow is the difference between money flowing in and out of your business over a given period. Your business can be profitable and still run out of cash.