Starting With EBITDA
EBITDA is earnings before interest, tax, depreciation and amortisation. Taking those four out gives a rough measure of the cash the trading business generates, independent of how it is financed, how it is taxed and how its assets were bought.
It is imperfect, notably because it ignores the fact that equipment genuinely wears out and has to be replaced. It is used anyway because it allows two businesses to be compared without their financing and accounting choices getting in the way.
What Normalisation Means
Normalising means adjusting the reported figure to show what the business would earn under normal ownership. In veterinary practice the adjustments are predictable.
- Owner remuneration
- Actual owner pay replaced with the market cost of employing someone to do the same clinical and management work. On a practice where the owner also does eight clinical sessions a week, this is a large number.
- Market rent
- Where premises are owned by the seller personally or by a pension scheme, a market rent is substituted so the trading business is valued on its own.
- Non-recurring items
- One-off legal costs, a dispute, an unusual write-off or a one-off gain, removed in both directions.
- Personal expenditure
- Anything through the business a buyer would not incur. Disclosing these openly works better than hoping they are not found.
- Deferred investment
- Where equipment replacement or premises maintenance has been postponed, a buyer treats the catch-up as a reduction, either from earnings or from price.
Where Buyers and Sellers Disagree
Almost every valuation dispute is an argument about one of two things: what a replacement for the owner would really cost, and whether an adjustment is genuinely non-recurring.
Sellers tend to assume one full-time vet replaces them. Buyers frequently find that an owner working sixty hours across clinical and management needs more than one person. Getting realistic about this before negotiations start avoids a painful conversation later.
Why It Matters So Much
Because the multiple is applied to it. An adjustment of £30,000 to normalised earnings changes the price by £150,000 at a multiple of five. That is why the schedule of adjustments deserves as much attention as the multiple itself, and why a valuation without a visible adjustment schedule is not worth much.
Written by Veterinary Accountants UK editorial team. Published 3 August 2026.
Last reviewed 3 August 2026. [REVIEWER DETAILS REQUIRED BEFORE PUBLICATION]