EBITDA Margin Calculator: How Much Profit Per Sale?

Is a 20.00% EBITDA margin good or bad?

On the defaults — $500,000 of revenue and $100,000 of EBITDA — the EBITDA margin is 20.00%. The EBITDA margin is the share of each sales dollar that stays as operating profit before interest, taxes, depreciation and amortisation — EBITDA divided by revenue, times one hundred. As a rough yardstick, an EBITDA margin in single digits can mean fierce competition or heavy operating costs — or a business that is spending to grow. An EBITDA margin of 20.00% means the business keeps $20 of operating profit on every $100 of sales — the business is keeping a fifth of each sales dollar as operating profit. An EBITDA margin in the mid-twenties or above can mean strong pricing power or low operating costs — or a business that is under-investing in its own future. A 20.00% EBITDA margin is neither good nor bad on its own: it is the share of each sales dollar that stays as operating profit, and the industry decides what that share means.

Three things about the model are worth stating plainly.

First, the EBITDA margin is $100,000 ÷ $500,000 × 100 = 20.00%. Second, the EBITDA needed for a 25.00% EBITDA margin is 25.00% × $500,000 = $125,000. And third, the revenue needed for a 25.00% EBITDA margin is $100,000 ÷ 25.00% = $400,000; all listed in Accuracy & limitations.

The worked example, line by line

Setup: $500,000 revenue, $100,000 EBITDA, target EBITDA margin 25.00%.

Line 1 — the EBITDA. The EBITDA is operating income $80,000 + depreciation $15,000 + amortisation $5,000 = $100,000.

Line 2 — the EBITDA margin. The EBITDA margin is $100,000 ÷ $500,000 × 100 = 20.00%.

Line 3 — the EBITDA needed. The EBITDA needed for a 25.00% EBITDA margin is 25.00% × $500,000 = $125,000.

Line 4 — the revenue needed. The revenue needed for a 25.00% EBITDA margin is $100,000 ÷ 25.00% = $400,000.

Line 5 — the check. $125,000 ÷ $500,000 × 100 = 25.00%, the target EBITDA margin; and $100,000 ÷ $400,000 × 100 = 25.00%, the target EBITDA margin.

Every branch, checked

Revenue $400,000: Revenue $400,000.00; EBITDA $100,000.00; EBITDA margin 25.00%; EBITDA needed for the 25.00% target $100,000.00; revenue needed for the 25.00% target $400,000.00 — With revenue of $400,000 the EBITDA margin rises to 25.00% — the business keeps $25 of operating profit on every $100 of sales.

EBITDA $150,000: Revenue $500,000.00; EBITDA $150,000.00; EBITDA margin 30.00%; EBITDA needed for the 25.00% target $125,000.00; revenue needed for the 25.00% target $600,000.00 — With EBITDA of $150,000 the EBITDA margin rises to 30.00% — the business keeps $30 of operating profit on every $100 of sales.

Revenue $1,000,000: Revenue $1,000,000.00; EBITDA $100,000.00; EBITDA margin 10.00%; EBITDA needed for the 25.00% target $250,000.00; revenue needed for the 25.00% target $400,000.00 — With revenue of $1,000,000 the EBITDA margin falls to 10.00% — the business keeps $10 of operating profit on every $100 of sales.

EBITDA $75,000: Revenue $500,000.00; EBITDA $75,000.00; EBITDA margin 15.00%; EBITDA needed for the 25.00% target $125,000.00; revenue needed for the 25.00% target $300,000.00 — With EBITDA of $75,000 the EBITDA margin falls to 15.00% — the business keeps $15 of operating profit on every $100 of sales.

Revenue $250,000: Revenue $250,000.00; EBITDA $100,000.00; EBITDA margin 40.00%; EBITDA needed for the 25.00% target $62,500.00; revenue needed for the 25.00% target $400,000.00 — With revenue of $250,000 the EBITDA margin rises to 40.00% — the business keeps $40 of operating profit on every $100 of sales.

Revenue $0: Revenue $0.00; EBITDA $100,000.00; EBITDA margin — (undefined: no revenue to divide the EBITDA by); EBITDA needed for the 25.00% target —; revenue needed for the 25.00% target — — With no revenue there is nothing to divide the EBITDA by, so the EBITDA margin cannot be computed — the calculator shows “—” with a note, never Infinity or NaN.

What-if bars — EBITDA $200,000, revenue $800,000, EBITDA $125,000: EBITDA $200,000: EBITDA margin 40.00%; revenue $800,000: EBITDA margin 12.50%; EBITDA $125,000: EBITDA margin 25.00% — EBITDA of $200,000 gives an EBITDA margin of 40.00%; revenue of $800,000 gives an EBITDA margin of 12.50%; EBITDA of $125,000 gives an EBITDA margin of 25.00%.

The reverses, worked backwards

Smallest whole-dollar EBITDA for the EBITDA margin to reach 20.00%: At the displayed $100,000 the figures are Revenue $500,000.00; EBITDA $100,000.00; EBITDA margin 20.00%; EBITDA needed for the 20.00% target $100,000.00; revenue needed for the 20.00% target $500,000.00. At the displayed $100,000 the EBITDA margin is 20.00% (exactly 20.00%). At $99,999 the EBITDA is 1 dollar short of the $100,000 needed — and the unrounded EBITDA margin is 19.9998, which displays as 20.00% after rounding, so $100,000 is the smallest whole-dollar EBITDA for the EBITDA margin to reach 20.00%.

Smallest whole-dollar EBITDA for the EBITDA margin to reach 25.00%: At the displayed $125,000 the figures are Revenue $500,000.00; EBITDA $125,000.00; EBITDA margin 25.00%; EBITDA needed for the 25.00% target $125,000.00; revenue needed for the 25.00% target $500,000.00. At the displayed $125,000 the EBITDA margin is 25.00% (exactly 25.00%). At $124,999 the EBITDA is 1 dollar short of the $125,000 needed — and the unrounded EBITDA margin is 24.9998, which displays as 25.00% after rounding, so $125,000 is the smallest whole-dollar EBITDA for the EBITDA margin to reach 25.00%.

Largest whole-dollar revenue for the EBITDA margin to STAY at or above 20.00%: At the displayed $500,000 the figures are Revenue $500,000.00; EBITDA $100,000.00; EBITDA margin 20.00%; EBITDA needed for the 20.00% target $100,000.00; revenue needed for the 20.00% target $500,000.00. At the displayed $500,000 the EBITDA margin is 20.00% (exactly 20.00%). At $500,001 the revenue is 1 dollar over the $500,000 needed — and the unrounded EBITDA margin is 19.9999600, which displays as 20.00% after rounding, so $500,000 is the largest whole-dollar revenue for the EBITDA margin to stay at or above 20.00%.

Smallest whole-dollar EBITDA for the EBITDA margin to reach 15.00%: At the displayed $75,000 the figures are Revenue $500,000.00; EBITDA $75,000.00; EBITDA margin 15.00%; EBITDA needed for the 15.00% target $75,000.00; revenue needed for the 15.00% target $500,000.00. At the displayed $75,000 the EBITDA margin is 15.00% (exactly 15.00%). At $74,999 the EBITDA is 1 dollar short of the $75,000 needed — and the unrounded EBITDA margin is 14.9998, which displays as 15.00% after rounding, so $75,000 is the smallest whole-dollar EBITDA for the EBITDA margin to reach 15.00%.

Largest whole-dollar revenue for the EBITDA margin to STAY at or above 25.00%: At the displayed $400,000 the figures are Revenue $400,000.00; EBITDA $100,000.00; EBITDA margin 25.00%; EBITDA needed for the 25.00% target $100,000.00; revenue needed for the 25.00% target $400,000.00. At the displayed $400,000 the EBITDA margin is 25.00% (exactly 25.00%). At $400,001 the revenue is 1 dollar over the $400,000 needed — and the unrounded EBITDA margin is 24.9999375, which displays as 25.00% after rounding, so $400,000 is the largest whole-dollar revenue for the EBITDA margin to stay at or above 25.00%.

Smallest whole-dollar EBITDA for the EBITDA margin to reach 30.00%: At the displayed $150,000 the figures are Revenue $500,000.00; EBITDA $150,000.00; EBITDA margin 30.00%; EBITDA needed for the 30.00% target $150,000.00; revenue needed for the 30.00% target $500,000.00. At the displayed $150,000 the EBITDA margin is 30.00% (exactly 30.00%). At $149,999 the EBITDA is 1 dollar short of the $150,000 needed — and the unrounded EBITDA margin is 29.9998, which displays as 30.00% after rounding, so $150,000 is the smallest whole-dollar EBITDA for the EBITDA margin to reach 30.00%.

A warning about the neighbours: every neighbour above shows as the target when rounded to two decimals, but its unrounded EBITDA margin is a hair below the target — 19.9998, 24.9998, 19.9999600, 14.9998, 24.9999375 and 29.9998. An investor underwriting on the unrounded EBITDA margin would still say no where the unrounded figure misses the line. The page prints the unrounded neighbour value in full so the rounding does not mislead you: 19.9998, 24.9998, 19.9999600, 14.9998, 24.9999375 and 29.9998.

What the defaults assume

The defaults are a $500,000 revenue, $100,000 of EBITDA and a target EBITDA margin of 25.00% — Revenue $500,000.00; EBITDA $100,000.00; EBITDA margin 20.00%; EBITDA needed for the 25.00% target $125,000.00; revenue needed for the 25.00% target $400,000.00. With Revenue $400,000, Revenue $400,000.00; EBITDA $100,000.00; EBITDA margin 25.00%; EBITDA needed for the 25.00% target $100,000.00; revenue needed for the 25.00% target $400,000.00. With EBITDA $150,000, Revenue $500,000.00; EBITDA $150,000.00; EBITDA margin 30.00%; EBITDA needed for the 25.00% target $125,000.00; revenue needed for the 25.00% target $600,000.00. With Revenue $1,000,000, Revenue $1,000,000.00; EBITDA $100,000.00; EBITDA margin 10.00%; EBITDA needed for the 25.00% target $250,000.00; revenue needed for the 25.00% target $400,000.00. With EBITDA $75,000, Revenue $500,000.00; EBITDA $75,000.00; EBITDA margin 15.00%; EBITDA needed for the 25.00% target $125,000.00; revenue needed for the 25.00% target $300,000.00. With Revenue $250,000, Revenue $250,000.00; EBITDA $100,000.00; EBITDA margin 40.00%; EBITDA needed for the 25.00% target $62,500.00; revenue needed for the 25.00% target $400,000.00. With Revenue $0, Revenue $0.00; EBITDA $100,000.00; EBITDA margin — (undefined: no revenue to divide the EBITDA by); EBITDA needed for the 25.00% target —; revenue needed for the 25.00% target —. With What-if bars — EBITDA $200,000, revenue $800,000, EBITDA $125,000, EBITDA $200,000: EBITDA margin 40.00%; revenue $800,000: EBITDA margin 12.50%; EBITDA $125,000: EBITDA margin 25.00%. With Revenue $0, EBITDA margin — (undefined: no revenue to divide the EBITDA by). With EBITDA $0, EBITDA margin 0.00%. With EBITDA $99,999, EBITDA margin 20.00%. With Revenue $500,001, EBITDA margin 20.00%. With EBITDA $100,000, EBITDA margin 20.00%. With EBITDA $124,999, EBITDA margin 25.00%. With EBITDA −$25,000, EBITDA margin −5.00% (unrounded −5). With EBITDA margin bars, EBITDA $200,000: EBITDA margin 40.00%; revenue $800,000: EBITDA margin 12.50%; EBITDA $125,000: EBITDA margin 25.00%.

A note on the rounding: with EBITDA of $99,999 the unrounded EBITDA margin is 19.9998, which rounds half-up to 20.00% — but it is still below the 20.00% line. With revenue of $500,001 the unrounded EBITDA margin is 19.9999600, which rounds to 20.00% — but it is still below the 20.00% line. With EBITDA of $124,999 the unrounded EBITDA margin is 24.9998, which rounds half-up to 25.00% — but it is just below the 25.00% line. The page prints the unrounded values so the rounding does not mislead you.

Output · formula · meaning

Who uses this

• The investor checking a company before buying: they learn $500,000 of revenue and $100,000 of EBITDA is a 20.00% EBITDA margin — and they check the $125,000 reverse to see the EBITDA a 25.00% margin needs.
• The owner pricing their own business: they learn a 20.00% margin means $20 of operating profit on every $100 of sales — and they check the $400,000 reverse to see the revenue a 25.00% margin needs.
• The analyst comparing two companies in one industry: they learn a 20.00% margin in a grocery chain and a 20.00% margin in a software company are different stories — and they check the $100,000 reverse to see the EBITDA a 20.00% margin needs.
• The student learning profitability ratios: they learn the EBITDA margin is EBITDA divided by revenue — the share of each sales dollar that stays as operating profit — and they check the $150,000 reverse to see the EBITDA a 30.00% margin needs.

Accuracy & limitations

The math is first-principles: the EBITDA margin is EBITDA ÷ revenue × 100; the EBITDA needed at the target is the target margin times the revenue; the revenue needed at the target is the EBITDA divided by the target margin — all rounded to two decimals half-up. The reverses are judged on the UNROUNDED EBITDA margin: a neighbour one dollar short shows as the target when rounded to two decimals, but its unrounded EBITDA margin is below the target, so it does not meet the bar — the page prints the unrounded neighbour value in full. A negative EBITDA margin means negative EBITDA: at −$25,000 of EBITDA the EBITDA margin is −5.00% (unrounded −5) — a negative EBITDA margin means the business is losing money on its day-to-day work — operating profit is negative, so the company burns cash on its core work — and a negative margin is not a bargain signal, it is a distress signal — so the margin is negative and the calculator shows the negative figure with a note, never hides it and never shows “—” for it. Zero revenue is undefined: with no revenue there is nothing to divide the EBITDA by, so the EBITDA margin cannot be computed — the calculator shows “—” with a note, never Infinity or NaN. What the model cannot do is judge the business: EBITDA is not cash flow — it ignores the capital expenditure the business needs to keep running, so a high EBITDA margin built on a capital-hungry business flatters it, so check what the business must spend to keep running; compare EBITDA margins within one industry, because a 20.00% margin in a grocery chain and a 20.00% margin in a software company are different stories; and the EBITDA margin says nothing about debt, buybacks, dividends, or the quality of the operating profit. Use it to see the share of each sales dollar that stays as operating profit — then read the rest of the accounts.

Frequently asked questions