A lot of home service owners think higher EBITDA is always better. But if you’re still growing, squeezing every possible point of profit out of the business can actually work against you.
Sometimes the better move is to keep investing in marketing, people, and growth, even if it means accepting a lower EBITDA margin today.
Want my full take? Here it is:
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Why EBITDA Matters, But Isn’t Everything
EBITDA is one of the most important numbers in your business. It measures earnings before interest, taxes, depreciation, and amortization, and it plays a major role in how buyers, banks, vendors, and other lenders evaluate your company.
But there’s a difference between running a profitable business and optimizing every decision around EBITDA. If you’re still growing, pushing your margin as high as possible can mean underinvesting in the things that could make the business significantly larger.
We’ve seen companies with impressive EBITDA margins that simply stopped investing enough in growth. The percentage looks great on paper, but the business may be smaller and ultimately less valuable than it could have been.
The goal is to find the balance: maintain healthy margins while continuing to invest in the growth of the business.
What Would 100 LSA Leads Do for Your Business?
Imagine 100 fresh leads coming into your business. Every. Single. Month.
Plumbing Innovations went from zero digital marketing presence to ~100 LSA leads every month.
Service Scalers started them with just $1,500/month in LSA spend, proved the channel worked, then scaled alongside the business.
Today, they’re spending $5,000+ per month and generating a consistent, predictable flow of ~100 leads they can build around.
That’s the goal: marketing you can actually plan your growth around.
Get Your EBITDA Up to Par
So what should a healthy home service business actually look like?
A good starting point is EBITDA of around 15%. Once you’re consistently in the 17% to 20% range, you’re running a strong operation. At Wilson, we’re currently in the low 20s, but it took years of improving the business to get there. Our EBITDA target was 17% for roughly five years before we finally hit it.
The easiest way to work toward those numbers is to start with gross margin. In plumbing, HVAC, and electrical, we want to see gross margin above 50%. That means getting control of labor, materials, equipment costs, commissions, and OEM rebates before worrying about squeezing expenses elsewhere.
From there, look at SG&A. At Wilson, we use a simple 50/30/20 framework: 50% gross margin, 30% SG&A, and 20% EBITDA. It gives you a quick way to see whether the economics of the business are heading in the right direction.
But your targets should also reflect where you are in the growth cycle. If you’re still below $5 million in revenue, I’d rather see you run a healthy business and reinvest in growth than obsess over producing a 25% or 30% EBITDA margin. As you scale, you can tighten the operation and work toward stronger margins without starving the business of the investments that got you there.
The Numbers to Watch
EBITDA doesn’t exist in a vacuum. Revenue, gross margin, operating expenses, and the size of the business all influence what that EBITDA actually means.
Here are a few numbers we use to understand where a home service business stands:
15% EBITDA: A solid target for a company operating at scale. This is the minimum range we generally want to work toward.
17% to 20% EBITDA: A strong range. At Wilson, 17% was our target for years before we finally reached it in 2025.
22% to 23% EBITDA: Where Wilson was running year to date when we recorded this episode. Even August, which was a weaker month for us, came in at 16.5% EBITDA.
50%+ gross margin: This is where we want plumbing, HVAC, and electrical businesses to be. If gross margin is below 50%, this is one of the first numbers I would investigate.
50/30/20: Our basic operating framework at Wilson: 50% gross margin, 30% SG&A, and 20% EBITDA.
$1 million EBITDA: An important threshold, but revenue still matters. A company producing $1 million of EBITDA on $2 million of revenue looks very different from one producing $1 million on $20 million.
Under $5 million in revenue: This is where I’d be careful about obsessing over EBITDA. Unless you’re preparing to sell, growing a healthy business may create more value than trying to push margins to 20% or 30%.
The trend I’d watch is whether revenue and EBITDA are growing together while gross margin remains healthy. You want a business that becomes more profitable as it scales without cutting the investments responsible for that growth.
Spend for Profitable Growth
The mistake is looking at marketing as an expense to cut whenever you want to improve EBITDA. Cutting $100,000 from your marketing budget might make the bottom line look better immediately, but that doesn’t mean you created a better business.
Instead, figure out what that marketing spend is actually producing. Track your spend through to leads, booked jobs, revenue, gross profit, and ultimately EBITDA. If you can consistently spend a dollar and generate enough gross profit to cover that dollar plus the additional overhead required to service the work, you have a channel worth continuing to fund.
That also means evaluating marketing alongside gross margin. You can generate a huge amount of revenue and still create a bad outcome if you’re buying work that isn’t profitable. With a target of 50%+ gross margin, you have more room to invest aggressively in customer acquisition while still working toward a healthy EBITDA margin.
The tactical approach is to look at each channel individually. PPC, Local Service Ads, SEO, direct mail, and every other source should earn its budget. Ask: How much did we spend? How much revenue did it produce? What was the gross profit on that revenue? What did we actually keep after the cost of acquiring and servicing those customers?
Then reinvest where the economics work. If a channel can absorb another $10,000 while maintaining acceptable acquisition costs and margins, increasing the budget may be smarter than protecting an extra point of EBITDA.
That’s the balance we’re after: don’t chase revenue at any cost, but don’t starve profitable marketing just to make your EBITDA percentage look better. The goal is to build a larger, healthier business while keeping the underlying economics intact.
Get In The Room
3 days. One room built for growth.
Tour Wilson Companies, learn from operators actively scaling their businesses, and leave with systems you can put to work immediately. Catalyst is intentionally limited to a small group of attendees.
May 3–5, 2027 | Akron, Ohio. Be there.
Don’t Let EBITDA Fool You
The numbers can point you in the wrong direction if you look at them without context. Watch out for these common mistakes:
Cutting marketing to boost EBITDA: You may improve the percentage while eliminating profitable growth.
Chasing revenue instead of profit: More leads and jobs mean little if gross margin falls with them.
Treating all marketing the same: Break out PPC, LSAs, SEO, direct mail, and other channels to see what actually performs.
Ignoring the full funnel: Track spend through leads, booked jobs, revenue, gross profit, and EBITDA.
Over-optimizing too early: Below $5M in revenue, maximizing EBITDA can come at the expense of building a larger business.
Assuming lower EBITDA is always bad: A temporary decline caused by productive growth investment is different from one caused by inefficient spending.
Look at your marketing spend alongside revenue, gross margin, and EBITDA to understand what your growth is actually costing you. Keep investing where the economics work, and fix the channels where they don’t.
Why Roofing Might Be the PERFECT Home Service Business
👊 John
Disclosure: Some of the content and links in this newsletter are sponsored or affiliate links, which means we may receive payment or earn a commission if you click through or purchase. However, all opinions expressed are entirely my own.
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