When an owner says their NDIS business "makes $300,000 a year", a buyer's first question is: under whose management, and after which costs? Normalised EBITDA is the attempt to answer that honestly. It restates historical earnings to show what the business would have earned if it had been run on a sustainable, arm's-length basis — without the current owner's personal arrangements and without genuinely one-off events.
This article is general information, not personal financial, tax or legal advice. Your accountant should prepare or review any normalisation schedule used in a sale.
What normalisation is — and is not
EBITDA (earnings before interest, tax, depreciation and amortisation) is a starting point, not a value. Normalisation adjusts it for items that would not continue under a new owner. It does not remove costs simply because they are inconvenient. A cost that recurs — even irregularly — is part of running the business.
The government's business.gov.au guidance on valuing a business makes the same general point: organised financial, asset, legal and operating records support a valuation, there is no single correct method, and professional advice is recommended.
Add-backs that usually need evidence
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Each adjustment should be traceable to a document a buyer's accountant can check:
| Adjustment | Typical evidence | Common problem |
|---|---|---|
| Owner wages or drawings expensed through the business | Payroll records, general ledger, tax returns | Added back without deducting the cost of replacing the owner's work |
| Genuinely non-recurring expense (for example a one-off legal matter) | Invoices, correspondence showing the matter is closed | Items that recur every year or two labelled "one-off" |
| Personal expenses paid by the business | Ledger coding, receipts | Poorly documented; buyers discount or reject them |
| Related-party rent above or below market | Lease, independent rent assessment | Adjusted one way only |
Owner replacement cost
In many small NDIS providers the owner is also the operations manager, rostering lead, compliance officer and key relationship holder. Adding back the owner's salary without deducting what it would cost to employ someone to do that work overstates earnings. The replacement cost should reflect the actual roles performed, at market rates, including on-costs.
Worked example (hypothetical)
The figures below are invented to show the mechanics. They are not a benchmark, a typical result or a price estimate for any business.
| Line | Amount (A$) |
|---|---|
| Reported EBITDA | 240,000 |
| Add: owner wages actually expensed through the business | +60,000 |
| Less: market cost to replace the owner's management role | −90,000 |
| Add: evidenced non-recurring expense | +15,000 |
| Normalised EBITDA | 225,000 |
Notice that normalised EBITDA is lower than reported EBITDA here. That can occur when the owner has been underpaying themselves for a demanding role. Sellers who present only upward adjustments tend to lose credibility quickly in due diligence.
Costs that cannot be normalised away
- Wages for staff needed to deliver current services, including overtime and agency cover if that is how shifts are actually filled
- Compliance costs such as audits, training, insurance and quality systems
- Software, rostering and claiming systems the business depends on
- Recurring "unusual" costs, such as regular recruitment campaigns
EBITDA is not cash flow, and not price
Normalised EBITDA ignores working capital movements, capital expenditure, tax and financing. A business can show healthy EBITDA while its bank balance is squeezed by payment timing and payroll cycles — see our guide to working capital when buying an NDIS business.
Price is a separate negotiation. It reflects risk: registration scope, participant and referral concentration, workforce stability, compliance history and deal terms. For how these factors interact, read how to value your NDIS business before selling.
Practical steps for sellers
- Prepare a normalisation schedule with a reference to evidence for every line
- Include downward adjustments, not only add-backs
- Have your accountant review the schedule before a buyer sees it
- Keep participant-level data out of financial workpapers; use aggregated figures
For the wider buyer review of the accounts — three-year trends, claims reconciliation and debtors — see how to analyse the financial statements of an NDIS business.
If you want an indicative, confidential view of how a buyer might read your earnings, request an NDIS business valuation appraisal. It is not a formal independent valuation, and it does not promise a sale price.
