The seven EBITDA drivers, explained

There are only seven ways to improve EBITDA. Not seven categories with sub-points, seven levers. Most leaders work two of them hard and leave the other five alone, usually without noticing.

The three categories

The seven sit in three groups. Acquire covers lead volume, conversion and average deal size. Retain and mix covers sales mix and gross margin. Run lean covers overhead spend and overhead efficiency.

Attention concentrates on the first group, because it is the most visible and the most enjoyable. The third group is usually the largest and almost always the most neglected.

Why a pound is not a pound

This is the part that changes how you prioritise. A one percent lift in revenue does not add one percent to EBITDA. It adds one percent of revenue multiplied by your gross margin.

On a 43% margin, an extra £100,000 of revenue adds £43,000 of gross profit and, with overheads unchanged, £43,000 of EBITDA. Meanwhile £100,000 taken permanently out of overheads adds £100,000 of EBITDA. All of it.

So overhead work is worth roughly two and a half times revenue work, pound for pound, at that margin. That asymmetry is invisible until you write it down, and it is why the least glamorous driver is often the most valuable.

The seven, one at a time

1. Lead volume. More of the right enquiries. Scales revenue directly, so it reaches EBITDA at your gross margin.

2. Conversion. The same pipeline, better worked. Moves in percentage points, and a point on a 40% rate is a 2.5% revenue lift, which is why it punches above its weight.

3. Average deal size. Price and scope on work you already win. The cheapest of the three to move, because it requires no new demand.

4. Sales mix. Shifting work towards higher-margin lines. Worth exactly the gap between your best and worst margin line, so if all your work carries the same margin, this driver does nothing.

5. Gross margin. Delivery cost on the work itself. Also in percentage points, and it applies to all revenue, which makes it powerful.

6. Overhead spend. The back office. A reduction is the gain, and every pound drops straight through.

7. Overhead efficiency. More from the same spend rather than less spend. The one nobody models, and often the one AI touches first.

Why one percent on seven beats ten percent on one

Ten percent on one driver is a hard year. One percent on all seven is a series of unremarkable changes, and it compounds, because each improvement is measured on the base the previous ones created.

On a mid-sized services business those seven one-percent moves can lift EBITDA by well over half. The revenue line barely moves. That is the whole point: the growth is not coming from selling more.

What is a good EBITDA margin?

It depends more on your sector than your performance. UK professional services commonly run 10% to 20%. Below 10% there is usually a pricing problem or an overhead problem, and both are fixable. Above 20% the question is normally whether growth is being under-invested in.

The more useful question is not what a good margin looks like in general. It is which of your seven drivers has the most room in it right now.