EBIT explained in three minutes, for people who skipped business school.

EBIT stands for Earnings Before Interest and Tax. In small-business reality, it's the number that answers one question: after I paid for the things I sold, paid my staff, and covered today's share of rent, did the day make money? If you only learn one finance concept this year, learn this one.

TL;DR

EBIT, in plain English

Most accounting glossaries define EBIT as "earnings before interest and tax." Technically correct, unhelpful in practice. The more useful definition for an owner-operator: EBIT is the profit your business made today, from the business itself. Strip out the loan interest you may be paying (that's a finance decision), strip out tax (that's a government decision), and what's left is the operating profit. That's EBIT.

For a café: it's what stayed after the milk, the staff, and today's slice of rent. For a salon: what stayed after the colour cost, the stylist hours, and today's share of insurance. For an e-commerce shop: what stayed after the COGS, the Mollie fees, the parcel, and today's sliver of the warehouse rent.

The formula nouz uses

nouz computes EBIT every evening using exactly this formula — every variable comes from the entries you've logged that day:

Gross revenue
  − Tax (VAT or sales tax)
  − Transaction fees (card only, never cash)
  = Net revenue
  − COGS (cost of goods sold, snapshotted at the moment of sale)
  − Variable costs (today's expenses across categories)
  − Fixed-cost slice (today's pro-rated share of monthly fixed costs)
  = EBIT

Every line here is mechanical. There's no judgement, no opinion. If you logged a €4 cappuccino sale, nouz knows the cappuccino's COGS at the moment you sold it (the value is snapshotted — even if you change the recipe later, this sale stays at the old number). Same with the card fee, the daily rent slice, everything. The full step-by-step is in the help center.

A worked café example

Suppose a Tuesday at a 14-table café in Vienna. The numbers (real, from Anna Mayr at Café Lumen):

The café made €300,94 of operating profit on the Tuesday. That's the EBIT. It's a real number, not an opinion. The bank and the tax office will eventually want a slice, but the business itself earned €300.

EBIT vs. gross profit vs. net income

These get mixed up. The cleanest way to think about them:

• Gross profit = revenue − COGS. The margin on what you sold, before any operating costs. Useful for menu pricing, less useful for running a business.
• EBIT = gross profit − operating expenses (rent, salaries, etc.). What the business itself earned today. Useful for daily decisions.
• Net income = EBIT − interest − tax. What's left after the bank and the tax office. Useful for annual filing, less useful for daily decisions.

For owner-operators, EBIT is the number that actually drives decisions. Net income is for the accountant.

Why owner-operators care about EBIT specifically

Three reasons. First: it's the only number that tells you whether today paid for itself. Gross profit ignores rent; net income drags in tax timing. EBIT is the cleanest "did today work" signal.

Second: banks ask for it. If you ever apply for a loan to expand, the loan officer wants monthly EBIT for the past 12 months. Owners who track it daily can produce that report in a button click. Owners who don't scramble for two weeks.

Third: it doesn't lie to you. Net income can be massaged with depreciation tricks and interest timing. EBIT is what the business earned, plain. Once you're in the habit of watching it daily, you stop being surprised by month-end.

If you want to see your own daily EBIT tonight, get started with nouz — setup takes 8 minutes and your first close-out lands this evening. Or read the longer companion piece: the daily-P&L template you can paste into any spreadsheet.

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