EBITDA vs. Net Income: What’s the Real Difference—and Why Should You Care?
Ever stare at a financial report and wonder what EBITDA or Net Income really mean?
You’re not alone.
Those two numbers show up in nearly every business’s financial statement, but they serve very different purposes—and knowing the difference can help you make smarter business decisions.
What Is EBITDA, really?
EBITDA stands for Earnings Before Interest, Taxes, Depreciation, and Amortization. Sounds like accountant-speak, right? Let’s break it down in real-world terms.
EBITDA shows how much money your business made from regular operations—before things like taxes, loan payments, or equipment wear-and-tear are factored in. It’s like saying, “How is the business doing at its core, just based on sales and basic expenses?”
Think of it as a clean snapshot of your business’s earning power, without all the extra noise.
What’s Net Income Then?
Net income is what’s left after everything has been taken into account—expenses, taxes, interest payments, depreciation, the works.
It’s the “bottom line” that shows up on your tax return and determines whether your business made money after covering all its costs.
Think of it as your real-world profit.
Real-World Examples
A Marketing Agency Owner:
EBITDA: You bring in $300K in revenue. After subtracting staff wages, rent, and software costs, your EBITDA is $100K.
Net Income: After you subtract loan interest, taxes, and depreciation on your office furniture, your net income is closer to $60K.
A Retail Shop Owner:
EBITDA: Your shop looks great post-renovation. Sales are strong and operating expenses are under control—EBITDA is $150K.
Net Income: But you're paying off a \$50K loan and accounting for depreciation—net income drops to $90K.
Why Both Numbers Matter
EBITDA helps you measure performance over time and compare yourself to similar businesses. It’s great for setting goals or attracting investors.
Net Income shows what you keep, which is vital for tax planning, budgeting, and knowing if it’s time to invest more or pull back.
If EBITDA is what your business could earn on a perfect day,
net income shows what you brought home.
Bottom Line
You don’t need a finance degree to understand your financials—you just need to know what to look for.
If you’re still unsure which number to focus on when making big decisions, you’re not alone. We help business owners make sense of their numbers, so they can grow with confidence—without all the jargon.
Let’s talk if you’re ready to make sense of your financials—on your terms.