FoundersPath Playbook
A reported profit number is a starting point, not an answer. Start at EBITDA, strip out the cash costs it ignores, and see what actually lands in the account. The gap between the two ends is the whole point.
Start at the EBITDA a seller quotes or a P&L reports. Then subtract each real cash cost the number leaves out: the market cost of replacing a working owner (including your own labor), the full debt service on any loan the business carries, the cash spent on equipment to stay alive, and any prepaid cash you have already collected but still owe service against. Fill what applies; add rows for anything specific. What is left is the cash that actually converts.
| Line | Annual $ | |
|---|---|---|
| Reported EBITDAthe headline number | ||
| Owner labor at marketreal cost to replace the working owner, including your own time | ||
| Debt serviceprincipal + interest, every dollar, on any loan the business carries | ||
| Maintenance capexannual cash to replace equipment as it wears out | ||
| Deferred-revenue drawdownprepaid cash already collected but service still owed | ||
| Real annual free cash | — | |
The headline margin is what the business looks like on paper. The real cash margin is what converts to money you can actually spend. The distance between them is what an EBITDA number hides.
Headline EBITDA margin
—
what the seller quotes and the P&L reports
Real cash margin
—
what actually lands in the account
"Profit is an opinion. Cash is a fact. The moment a business carries debt, the two numbers split, and the number at the bottom of this bridge is the only one that clears payroll."