Worksheet
Earnings normalisation worksheet
Turn reported profit into normalised earnings, line by line, with a note of the evidence for every adjustment. Use it online or download the Excel workbook.
- Written for
- Accountants preparing a client for a valuation, and owners working with them.
- Answers
- What are the normalised (maintainable) earnings of this business, and what evidence supports each adjustment?
Illustrative arithmetic, not a valuation. This tool shows how the numbers you enter combine. It does not test whether those numbers are right, and it is not an independent valuation of any business. Everything runs in your browser: nothing you type is sent to Valuo or recorded in analytics.
The formulas
Reported EBITDA = net profit before tax + interest expense − interest and other non-operating income + depreciation and amortisation
Normalised EBITDA = reported EBITDA + (owner remuneration charged − market cost of the roles) + personal expenses + non-recurring costs − non-recurring income + (related-party rent paid − market rent) ± other adjustments
Simple average = sum of years ÷ number of years
Weighted average = (1 × oldest + 2 × middle + 3 × latest) ÷ 6, or with two years entered (1 × older + 2 × latest) ÷ 3
The owner and rent lines can reduce earnings: if an owner is paid less than the market cost of their roles, or rent is below market, the adjustment is a deduction. Normalisation is not only about adding back.
Worked example
A hypothetical business over three years. The working owner draws less than it would cost to replace them, rents premises from the owner's family trust below market, and had a one-off $30,000 relocation cost in year 2 and a $12,000 insurance recovery in year 3.
| Line | Year 1 | Year 2 | Year 3 |
|---|---|---|---|
| Reported EBITDA | $200,000 | $234,000 | $254,000 |
| Owner remuneration vs market | -$50,000 | -$52,000 | -$50,000 |
| Personal expenses | $9,000 | $11,000 | $10,000 |
| Non-recurring costs | $0 | $30,000 | $0 |
| Non-recurring income | $0 | $0 | -$12,000 |
| Related-party rent vs market | -$12,000 | -$12,000 | -$12,000 |
| Normalised EBITDA | $147,000 | $211,000 | $190,000 |
Simple average: $182,667. Weighted average: $189,833. Latest year: $190,000. Which figure is maintainable is a judgement about the trend and its causes, explained in which year's profit to use.
What evidence supports each line
| Adjustment | Evidence a reviewer will expect |
|---|---|
| Owner remuneration | A description of each role and hours, and market evidence of what it costs to employ someone to do it (recruiter data, job advertisements, award rates as a floor). |
| Personal expenses | General ledger detail and invoices showing the private nature of each item. |
| Non-recurring items | Invoices, settlement letters or correspondence, and a reason the item will not recur. |
| Related-party rent | The lease and a market rent assessment from a property valuer. |
Limitations
- Normalisation produces earnings, not value. A negative or highly volatile result means a capitalised earnings approach may not apply: see valuing a business with negative or volatile earnings.
- The tool does not adjust for tax, for a buyer's synergies, or for changes a buyer might make.
- Three years is a convention, not a rule. Use the years that represent the business.
Read more: normalising a working owner's salary, what counts as a non-recurring expense, market rent adjustments.
Cite or reuse this page
Valuo Insights team (2026). Earnings normalisation worksheet. Valuo. https://valuo.com.au/insights/tools/earnings-normalisation-worksheet/ (updated 14 November 2026).
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