WELCOME TO ISSUE NO #056

Consulting | Shop | Website | Newsletter | Speaking

📆 Today’s Rundown

Hey 👋, hope you had a great week! I bet you missed me, but I was so busy cooking something that you’re going to love. Stay tuned for more info! 👀

In the last issue, we discussed why tracking Net Income matters, and now we are moving with the next topic from Cash Flow & Expenses content.

Let’s talk about ⬇️

EBITDA

Let's be real: EBITDA sounds more like something you'd catch on a medical show than something useful for your SaaS company. 😅

But here's the truth: Whether you're preparing for fundraising, scaling your startup, or just trying to get a clearer picture of your profitability, EBITDA matters…a lot.

So today, let's cut through the financial mumbo-jumbo and finally make sense of EBITDA in a way you can actually use.

Sound good? Let’s dive right in!

TL;DR

🎯 First Things First: What Exactly Is EBITDA?

📌 Why SaaS Founders Should Love (and Be Careful With!) EBITDA

🧐 When EBITDA Really Shines for SaaS Companies

⚠️ Alternatives to EBITDA You Should Consider

🔑 Quick EBITDA Tips for SaaS Founders:

🎯 First Things First: What Exactly Is EBITDA?

EBITDA stands for "Earnings Before Interest, Taxes, Depreciation, and Amortization" (try saying that five times fast).

Simply put, EBITDA shows you how profitable your business operations truly are—without getting bogged down by things like loan interest, asset depreciation, or Uncle Sam's taxes.

It's like looking at your business's health check-up—minus all the distractions. 🩺

Here's how you calculate it:

Quick example:

• Net Income: $1.25M

• Interest Expense: $200K

• Taxes: $300K

• Depreciation: $100K (goodbye fancy office equipment value!)

• Amortization: $150K (software licenses and patents)

👉 EBITDA = $1.25M + $200K + $300K + $100K + $150K = $2M

Boom. You’re officially EBITDA fluent.

📌 Why SaaS Founders Should Love (and Be Careful With!) EBITDA

Look, EBITDA is super useful because:

• It reveals if your core SaaS operations are profitable.

• Investors and lenders use it to quickly measure your growth efficiency.

• It removes distracting variables like asset wear-and-tear, interest on debts, and taxes from your profit calculations.

BUT (and this is a big but 🍑), EBITDA can also be sneaky:

• It doesn't include capital expenditures…money you invest in assets and long-term growth.

• It won't account for working capital changes like customer acquisition costs.

• It’s not standardized, meaning different folks might calculate it differently.

Think of EBITDA as your business’s flattering selfie: great for quick impressions, but not the whole story.

Need clarity on your financial strategy or cash flow optimization?

I'm Aleksandar, fractional CFO at Fiscallion, where we help founders like you achieve financial clarity, streamline reporting, and build investor-ready forecasts.

Ready to level up your finances?

🧐 When EBITDA Really Shines for SaaS Companies

• Scaling Fast? EBITDA clearly shows if your increased spending on marketing or hiring is improving your core business operations.

• Talking to Investors or Banks? They love EBITDA because it gives a clean view of operational profitability.

• Seasonal Business? EBITDA smooths out seasonality and gives you consistent insight into how you're doing operationally.

But, as always, use it wisely…because if you rely ONLY on EBITDA, you might miss crucial warning signs like hidden costs or unsustainable spending patterns.

⚠️ Alternatives to EBITDA You Should Consider

While EBITDA is helpful, here are three other important metrics you shouldn't ignore:

• Annual Recurring Revenue (ARR) 📈
  Measures your steady revenue stream from subscription customers each year, crucial for SaaS businesses.

• Gross Profit 💰
  Your total revenue minus the direct cost of delivering your SaaS product. A good gross margin signals strong product-market fit and efficient operations.

• Free Cash Flow (FCF) 💸
  How much cash your SaaS actually generates after capital expenditures. Critical for understanding real-world profitability and valuation.

🔑 Quick EBITDA Tips for SaaS Founders

• Don't Skip Cash Flow Checks. Always cross-check EBITDA with cash-flow metrics (FCF) to avoid blind spots.

• Standardize Your EBITDA Calculation. Decide on how you measure EBITDA, document it, and stick to it consistently.

• Benchmark Against Peers. Use EBITDA along with ARR and Gross Margin to compare your performance with similar SaaS companies.

🎉 Congrats! You’re officially EBITDA-savvy!

EBITDA isn't scary…it just needs context.

If you’re still scratching your head or just want a second pair of eyes on your SaaS metrics, just hit reply. I’m always here to help!

Cheers to your growth (and to fewer confusing acronyms!)

Earn free gifts 🎁 

You can get free stuff for referring friends & family to my newsletter 👇️ 

50 referrals - Cash Flow Models Bundle 💰️ 

10 referrals - SaaS Financial Model 📊 

You currently have 0 referrals, only 10 away from receiving SaaS Financial Model.

Copy & Paste this link: https://thestartupfinance.com/subscribe?ref=PLACEHOLDER

_{P.S. Whenever you’re ready, here’s how I can help:}

• Free Consultation: Book your strategy call.

• Keynote Speaking: Schedule me for your event.

• Sponsor my Newsletter: Reach 5,000+ subscribers.