EBITDA is earnings before interest, taxes, depreciation and amortization. For an Amazon business, it is net profit with four items added back: the interest you pay on loans and inventory financing, income tax, and the depreciation and amortization of equipment, software and other long-lived assets. It shows how much the business earns from selling, before financing and accounting choices.
EBITDA comes up when you talk to a buyer, a lender or an investor, and when you compare your business with others. It is also easy to get wrong for an Amazon seller, because the costs that matter most on Amazon (fees, advertising, refunds, inventory) sit above the EBITDA line and have to be complete before the number means anything.
How do you calculate EBITDA for an Amazon business?
EBITDA = Net profit + Interest + Income tax + Depreciation + Amortization
Or, working down from revenue:
EBITDA = Revenue − COGS − Amazon fees − Advertising − Refund costs − Operating expenses
COGS (cost of goods sold) is what you paid for the units you sold, including inbound freight and duties. Amazon fees include referral fees, FBA fulfillment fees, storage and any surcharges. Operating expenses are everything else needed to run the business: staff, contractors, software, office, accounting, and a salary for the owner.
Worked example: one year, from revenue to EBITDA
| Line | Amount |
|---|---|
| Revenue | $1,200,000 |
| COGS (landed) | −$420,000 |
| Amazon fees (referral, FBA, storage) | −$360,000 |
| Advertising | −$120,000 |
| Refunds and return costs | −$24,000 |
| Staff and contractors | −$60,000 |
| Owner salary | −$90,000 |
| Software and tools | −$12,000 |
| Other overhead (includes a one-off $8,000 legal bill) | −$14,000 |
| EBITDA | $100,000 |
| Depreciation and amortization | −$4,000 |
| Interest on inventory financing | −$18,000 |
| Income tax | −$20,000 |
| Net profit | $58,000 |
EBITDA margin is $100,000 ÷ $1,200,000 = 8.3%. Net margin is 4.8%. The gap between the two is almost entirely interest and tax, which is typical for an Amazon business: depreciation is small because the business owns few physical assets.
What is adjusted EBITDA, and what can you add back?
Adjusted EBITDA removes items that will not repeat under a new owner or in a normal year. It is the figure buyers and lenders usually work from. Common add-backs for Amazon businesses:
- Owner salary above market rate. If you pay yourself $90,000 and a manager to replace you would cost $70,000, add back $20,000.
- One-off costs. A trademark dispute, a one-time consultant, a warehouse move. In the example, the $8,000 legal bill.
- Personal expenses run through the business. Only with records that show what they were.
Adjusted EBITDA in the example: $100,000 + $20,000 + $8,000 = $128,000.
What should not be added back: advertising you “could” cut, refunds you think were unusually high, storage fees from overstocking, or an Amazon fee increase. These are costs of running the business as it runs. Buyers and their accountants remove such add-backs during due diligence, and a number that shrinks under review costs more credibility than it gained.
EBITDA or SDE: which one applies to your business?
SDE (seller’s discretionary earnings) adds back the full compensation of one owner-operator, not only the part above market rate. In the example:
SDE = EBITDA + Owner salary + One-off costs = $100,000 + $90,000 + $8,000 = $198,000
SDE is used for smaller, owner-run businesses where the buyer will likely take over the owner’s work. EBITDA (usually adjusted) is used for larger businesses with a team, where the buyer will hire someone to run it. Which one applies affects the multiple a buyer uses, so it is worth knowing which your business will be judged on before a conversation starts.
What does EBITDA miss for an Amazon seller?
Cash tied up in inventory. EBITDA counts profit when units sell, but you pay for stock months earlier. If inventory grew from $150,000 to $210,000 over the year, $60,000 of the $100,000 EBITDA went into stock on the shelf, not into your bank account. A growing Amazon business can show healthy EBITDA and still run short of cash.
Interest that is part of operations. For sellers who finance inventory every season, interest is closer to a cost of goods than a financing choice. EBITDA excludes it, so compare EBITDA with net profit before drawing conclusions.
Incomplete costs above the line. EBITDA is only as accurate as the P&L it comes from. Missing storage fees, unrecorded reimbursements, or COGS without freight all flow straight into EBITDA.
Best practices
- Calculate EBITDA monthly, not only when selling. A 12-month trend is more convincing than a single year-end figure.
- Use landed COGS. Product cost plus freight, duties and prep.
- Record every Amazon fee as charged, including storage, aged inventory surcharges and low-inventory-level fees.
- Pay yourself a salary in the books, even if you draw it irregularly. Without it, EBITDA looks higher than a buyer will accept.
- Document each add-back with an invoice or explanation at the time it happens.
- Track inventory value alongside EBITDA so the cash picture is visible.
Common mistakes
- Calculating EBITDA from Amazon payouts. Payouts net out fees, refunds and reserves, and they don’t match the period the sales happened in.
- Adding back advertising. Advertising is an operating cost for nearly every Amazon business.
- Leaving out the owner’s salary. It inflates EBITDA and then falls apart under review.
- Treating EBITDA as cash. Inventory growth absorbs it.
- Mixing cash-basis and accrual figures from different months or tools.
FAQ
What is a good EBITDA margin for an Amazon business? It varies widely by category, price point and advertising intensity. Compare your own trend month to month and against businesses in the same category rather than against a single benchmark.
Is EBITDA the same as net profit? No. EBITDA is net profit before interest, taxes, depreciation and amortization. For Amazon sellers the main difference is usually interest and tax.
Do buyers of Amazon businesses use EBITDA or SDE? Smaller owner-run businesses are usually valued on SDE, larger ones with a team on adjusted EBITDA.
Are Amazon fees part of EBITDA? Yes. Referral, fulfillment and storage fees are operating costs and are deducted before EBITDA.
Can EBITDA be positive while I run out of cash? Yes, if inventory grows faster than profit, or if loan repayments are large. Track cash and inventory value alongside it.
Conclusion
EBITDA is a simple formula applied to a P&L that has to be complete first. Build it from landed COGS, every Amazon fee as charged, advertising, refunds and a real owner salary; keep add-backs to items that truly will not repeat; and read it next to net profit and inventory value, because on Amazon the cash story often differs from the earnings story.
sellerboard builds the upper part of that P&L automatically: revenue, Amazon fees, advertising, refunds and COGS per product and per month, with your own recurring and one-off expenses added alongside. That makes monthly EBITDA a matter of adding interest, tax and depreciation back to a net profit figure that is already complete.
Figures in the example are illustrative.
