Distributable Cash
Definition
Distributable cash is the amount of money actually available for the owner to take out of the business after all real cash obligations have been met. It is not the same as EBITDA, net income, or profit on the P&L.
Distributable Cash = Net Income + Depreciation/Amortization − CapEx − Debt Principal Payments − Estimated Tax Obligations − Working Capital Increases − Cash Reserve Buffer
In plain terms: start with what the business earned, add back non-cash expenses, then subtract everything that requires cash — equipment purchases, loan payments, taxes, the additional working capital needed to support growth, and a prudent reserve. What’s left is what the owner can safely take out without compromising the business.
Why This Matters for Owners
This is the number owners care about most — and the one most budgets never calculate. Owners who look only at EBITDA or net income to decide on distributions are flying blind. A business can show 250,000 in distributable cash — because the rest is consumed by debt service, CapEx, taxes, and working capital.
When the annual budget produces a clear distributable cash number, the distribution conversation becomes rational instead of emotional. The owner stops asking “can I afford this?” and starts saying “the model says I can distribute X this quarter without compromising the plan.” That’s a fundamentally different way to own a business — and it connects directly to the Cash Flow targets on the Owner’s Scorecard™.
Where This Concept Appears
- Module 4, Lesson 5 — Introduced as the question most budgets never answer
- Module 4, Lesson 6 — Calculated as part of the annual budget process
- Module 4, Lessons 7–8 — Projected forward in the five-year forecast across scenarios
- Module 4, Lesson 9 — Reviewed monthly and recalibrated quarterly inside the ownership rhythm