For family businesses, EBITDA is the go-to metric for evaluating financial performance. It’s a quick way to assess cash flow, compare companies, and gauge business value. But legendary investor Warren Buffett has long warned against relying too heavily on EBITDA—because it doesn’t always tell the full story of a business’s financial performance.
For instance, EBITDA can mask expenses that impact long-term business health. Ignoring these expenses may create an inflated view of profitability.
Before you rely too heavily on EBITDA, read “Is All EBITDA Created Equal?” to see what you should consider when assessing your business’s financial performance.
Read about assessing family business financial performance with EBITDA here.
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