Your Revenue Grew 20%. Your EBITDA Grew 20%. That's a Failure.
The only number that matters is the gap between how fast revenue grows and how fast cost grows. If they move together, you have bought yourself more work at the same margin.
Cyril BelloirFinancial StrategistThe arithmetic nobody puts on the board pack
Take a business at €20M revenue, €17M cost, €3M EBITDA — a 15% margin. Grow revenue 20% and you are at €24M. If cost also grows 20%, cost lands at €20.4M and EBITDA at €3.6M. You did a year of work for €600k.
Now grow the same revenue with cost rising only 8%. Cost lands at €18.36M and EBITDA at €5.64M. Identical top line, €2.04M more profit. At an eight-times multiple, that discipline alone created €16.3M of enterprise value on exactly the same sales.
The ratio to run your business on
Operating Leverage Ratio is the percentage change in EBITDA divided by the percentage change in revenue. Below 1.0 you are diluting yourself. Between 1.0 and 1.5 is ordinary. Above 2.0 is what earns a premium multiple, because it tells a buyer the model scales without proportional investment.
The distinction that makes it actionable is which costs are permitted to scale with revenue and which are not. Billable delivery labour on chargeable work can scale. Finance, HR, IT, management and marketing operations must not. In most companies the second bucket quietly tracks the first, because nobody ever decided that it shouldn't.
Why buyers read it before they read your deck
Owners present revenue growth as the achievement and treat cost growth as a consequence. Buyers do the opposite. They put both lines on one chart and price the slope, not the size. A company growing 30% with cost growing 29% is a harder sell than one growing 12% with cost growing 4%.
Pull eight quarters of revenue and total operating cost. Index both to 100 at the start and plot them on one chart. If the lines run parallel, you have no operating leverage — and no story to tell a buyer.
Former CFO of Europe's fastest-growing facility management group, with more than 60 due diligence processes completed.
Meet the team →Questions we get asked
What is a good operating leverage ratio?
Operating Leverage Ratio is the percentage change in EBITDA divided by the percentage change in revenue. Below 1.0 you are diluting margin as you grow. 1.0 to 1.5 is ordinary. Above 2.0 earns a premium multiple.
Which costs are allowed to grow with revenue?
Billable delivery labour on chargeable work. Finance, HR, IT, management and marketing operations should not scale linearly — in most companies they quietly do, because nobody ever decided they shouldn't.
Why does cost discipline matter more than growth to a buyer?
Because buyers price the slope of the two lines, not the size of the top one. On identical revenue, holding cost growth to 8% instead of 20% created €2.04M more EBITDA in our worked example — €16.3M of enterprise value at an eight-times multiple.
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