What is a good EBITDA margin for a small business?

Most healthy small businesses run an EBITDA margin between 10% and 20%. Service businesses and SaaS often run higher (20–35%+), while restaurants and retail typically run 10–15%. CFO Grade compares your EBITDA margin to industry-specific benchmarks across 16 sectors.

What DSCR do lenders look for?

Most SBA and commercial lenders require a Debt Service Coverage Ratio (DSCR) of at least 1.25x. Construction surety bonds often require 1.5x or higher. A DSCR below 1.0x means your EBITDA does not cover your annual debt payments.

How does CFO Grade calculate the letter grade?

CFO Grade scores 24+ financial ratios across profitability, liquidity, leverage, and efficiency — weighted by industry. The composite score maps to a letter grade from A+ to F. The full methodology and benchmark sources are described in the report and the disclaimer page.

Yes. The full analysis, 24+ ratios, letter grade, and industry benchmarks are completely free with no signup. Optional paid features include a $9 PDF export and a $19 Pro Pass with AI-generated CFO memo and 30 days of unlimited PDFs.

Do I need to create an account?

No account is required. Your numbers stay on your device unless you explicitly opt in to anonymized peer benchmarking. Pro entitlements are bound to your device with a restore link you can email yourself.

Is CFO Grade financial advice?

No. CFO Grade provides educational insights for business owners and analysts. It is not financial, tax, legal, or investment advice. Always verify the output with a qualified professional before making business decisions.

Profitability

EBITDA Margin

Short answer

EBITDA Margin is EBITDA divided by Revenue, expressed as a percentage. It strips out financing, tax, and accounting decisions to show how much operational cash a business generates from each dollar of sales — a cleaner cross-industry profitability measure than net margin.

Formula

EBITDA Margin (%) = EBITDA / Revenue × 100

Take EBITDA (operating cash earnings), divide by revenue, multiply by 100.

Why it matters

EBITDA margin lets you compare businesses across sizes and industries. A 5% EBITDA margin on a grocery store is healthy; a 5% EBITDA margin on a SaaS company is alarming. CFO Grade scores it against industry-specific medians.

Benchmarks

Excellent (most industries)≥ 20%

Healthy10–20%

Marginal5–10%

Distress< 5%

Worked example

Revenue$2,000,000
EBITDA$240,000

240,000 / 2,000,000 × 100 = 12% EBITDA margin

Common questions about EBITDA Margin

What is EBITDA Margin?+

EBITDA margin is EBITDA as a percentage of revenue — the most common shorthand for how profitable a business is at an operational level.

How is EBITDA Margin calculated?+

Take EBITDA (operating cash earnings), divide by revenue, multiply by 100.

What is a good EBITDA Margin?+

A healthy ebitda margin is typically around ≥ 20% — excellent (most industries). Specific targets vary by industry and stage; check our benchmarks above for your sector.

Why does EBITDA Margin matter?+

EBITDA margin lets you compare businesses across sizes and industries. A 5% EBITDA margin on a grocery store is healthy; a 5% EBITDA margin on a SaaS company is alarming.

See your business's ebitda margin.

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Related concepts

EBITDA Gross Margin Net Margin