Adjusted EBITDA for a funeral home

When a consolidator or private equity platform sends a letter of intent, the price is almost always a multiple of one number. That number is adjusted EBITDA, and the letter rarely spells out how it was built. Two parties can agree on a multiple and still be hundreds of thousands of dollars apart because they adjusted EBITDA differently. This page explains the term as it is used in funeral home deals, and it is part of our funeral home valuation hub.

What makes EBITDA “adjusted” in a funeral home deal?

Plain EBITDA comes straight from the books. The adjustments restate it as if the firm were run by a paid manager, rented its building at market, and had no personal or one-time costs. The goal is the earnings an outside owner could expect to keep.

The concept is close to seller’s discretionary earnings, with one key difference. SDE leaves one owner’s full pay in the earnings because the buyer will do that job. Adjusted EBITDA takes it back out and charges a market wage instead, because the buyer will hire someone. That is why firms with salaried management, multiple locations, or an absentee owner are priced on adjusted EBITDA.

No law or accounting standard defines the adjustments. Even Carriage Services, a public company, sets its own terms: its 2025 Form 10-K ties executive performance awards to “adjusted consolidated EBITDA” as the company defines it. Every party to a funeral home sale does the same thing, which is why the evidence behind each line matters more than the label.

How do you build adjusted EBITDA from the books?

Start with pre-tax income, add back interest, depreciation, and amortization, then make a short list of documented adjustments. Each adjustment should be small in number, large in dollars, and backed by paper.

The manager-wage line is where most disputes start. The Bureau of Labor Statistics reports a May 2025 median of $78,790 for funeral home managers, before payroll taxes and benefits. A seller who charges $60,000 for a manager who must also serve as funeral director in charge and take night calls is inviting a lower number.

Rent works in both directions. If the owner’s real estate entity charges below-market rent, adjusted EBITDA is overstated for any buyer who will rent the building. Our guide to valuing funeral home real estate covers how a market rent is set for a special-purpose building.

Why is every dollar of adjusted EBITDA worth arguing over?

Because the multiple magnifies it. At consolidator pricing, a single disputed adjustment can move the price more than the seller’s annual salary.

On its Q4 2025 earnings call, Carriage management said that “from an EBITDA multiple perspective, anywhere between 7 and 9” was a fair way to think about its planned 2026 acquisitions, and that multiples were remaining “pretty steady.” At that range, each $10,000 of accepted adjustment is $70,000 to $90,000 of price. That arithmetic applies only to firms a buyer like Carriage would pursue. Smaller firms trade lower, which our guide to funeral home valuation multiples explains.

The same call shows why public-company margins are a poor yardstick. Carriage reported fourth-quarter 2025 adjusted consolidated EBITDA of $32.5 million, a 30.8% margin, on a base that includes cemeteries, preneed, and trust investment income across 155 funeral homes. A single-location family firm should be judged against its own history.

How do lenders use adjusted EBITDA?

Lenders use it to decide how much debt the firm can carry. Under SBA SOP 50 10 8.1, historical debt-service coverage is EBITDA divided by post-transaction debt service, and an initial acquisition needs at least 1.25.

The SOP also tightens what EBITDA the lender may use. For initial acquisitions and business expansions priced at $3 million or more, a quality of earnings report is required, and the lender must use the QoE’s earnings for coverage. In practice, that means a seller’s adjusted EBITDA is only a proposal until an independent accountant has tied it to bank deposits. Our quality of earnings guide walks through those tests, and the SBA loan DSCR calculator lets you test coverage on your own numbers.

How do sellers and buyers each build their version?

The seller builds the highest figure the records can support; the buyer builds the figure that will repeat under new ownership. Both are legitimate, and the gap between them is the negotiation.

A seller should present a short, documented bridge and resist padding it. Every unsupported item makes a buyer discount the supported ones. A buyer adds forward-looking subtractions the seller would rather leave out, such as a trade-cremation account that is likely to leave or a wage increase needed to keep a key director.

Buyers also keep their own synergies for themselves. A private equity platform may plan to centralize embalming or move cremations to its own crematory. Those savings raise what the platform can afford, but they are not part of the seller’s adjusted EBITDA, and a seller who adds them invites a quick rejection.

Which adjustments do buyers usually reject?

Buyers reject items that recur, items without paper, and items that describe the future rather than the past. In our experience, the same handful of claims fails in most funeral home deals.

Removing a weak item yourself before a buyer finds it protects the credibility of everything else in the bridge.

What does a full adjusted EBITDA bridge look like?

Below is a complete bridge for a made-up firm, showing where seller and buyer part ways and what the lender does with the result.

The $40,000 gap is one line, but at an illustrative 7x it is $280,000 of price. That is why a short bridge with complete evidence often beats a long one with optimistic items. Start with the add-back guide to see which adjustments buyers usually accept.