Margin and EBITDA improvement is usually the fastest value driver to move, and the improvement is easy to measure if your books are in order. In most owner-led Canadian companies, the losses concentrate in ten predictable places: stale prices, unmanaged discounts, unprofitable work hidden in averages, unbilled extras, poor job costing, rework, overhead that grew in good years, owner compensation that hides true costs, slow cash and too many add-backs. This guide shows how to find each one in your own records.
EBITDA means earnings before interest, taxes, depreciation and amortization. It is a common shorthand for operating profit in private-company discussions. It is not a figure your accountant prepares for tax purposes, so agree with your CPA how it is calculated for your company. CPA Canada is the national body for chartered professional accountants if you need to find one.
Before you start: get the numbers you need
You cannot fix what you cannot see. Ask your bookkeeper or accountant for:
- Monthly income statements for the last 24 months.
- Revenue and direct costs split by service line, product group or customer type.
- Your current price list and the date each price was last changed.
- A list of every discount or credit given in the last 12 months, if your system records them.
- Receivables by age at the end of each month.
If some of this does not exist, that is your first finding. Producing it monthly is part of improving earnings quality.
1. Prices that have not kept up with costs
How to find it: compare the date each main price was last set with how much your main costs (wages, materials, vehicles, insurance, rent) have risen since. If costs have risen and prices have not, the margin has quietly moved to your customers.
What to do: reprice the highest-volume items first, explain the change to customers in plain terms, and set a calendar date to review prices every year.
2. Discounts without rules
How to find it: pull every discount and credit for a year. Look at who gave them, how large they were and whether they won the work.
What to do: write discount rules, such as who can approve what amount and for what reason, and track discounts monthly as a line in the management accounts.
3. Unprofitable work hidden in averages
How to find it: calculate gross margin separately for each service line, product group or customer type. Averages often hide one line that loses money while the others carry it.
What to do: reprice it, change how it is delivered, or stop offering it. Sometimes a low-margin line is worth keeping because it feeds a profitable one, but that should be a decision, not an accident.
4. Unbilled time and materials
How to find it: compare materials purchased and hours paid with materials and hours billed, by job or by month. A persistent gap usually means extras that were done but never invoiced.
What to do: require change orders or a written note for any extra work, and make invoicing part of closing a job rather than something done later.
5. Weak job costing
How to find it: pick ten recent jobs and calculate their actual margin. If this takes more than an hour, or nobody can do it, job costing is weak.
What to do: set up simple job costing for the main job types, reviewed monthly. Estimates improve quickly once estimators see their own results.
6. Rework and callbacks
How to find it: count jobs that needed a return visit, a redo or a warranty fix, and estimate the cost of each.
What to do: treat rework as a margin line, assign someone to reduce it, and share the numbers with the team. It is often cheaper to fix the cause than to keep absorbing the cost.
7. Overhead that grew in good years
How to find it: list every overhead cost above a modest threshold and ask, for each one, whether you would add it today if it did not exist.
What to do: cut what you would not choose again, renegotiate what you would, and set an overhead-to-revenue target for the management accounts.
8. Owner compensation that hides the true cost
How to find it: compare what you pay yourself, including any benefits, with what it would cost to hire someone to do your role.
What to do: nothing dramatic, but know the number. If you are underpaid relative to a replacement, EBITDA overstates what a new owner would earn. If you are overpaid, the difference may be an add-back. Your accountant can advise on how to treat it.
9. Slow cash
How to find it: calculate receivable days each month: receivables at month-end divided by that month's revenue, multiplied by the days in the month. Track it for a year.
What to do: take deposits, bill in stages on larger jobs, invoice on completion and give someone other than the owner the job of collecting. Slow cash does not reduce EBITDA directly, but it raises borrowing costs and hides how much capital the business really needs.
10. Too many add-backs
How to find it: list every expense you would describe as personal, one-time or not needed by a new owner. Count them and total them.
What to do: stop running personal expenses through the company where possible, document the genuine one-time items as they happen, and keep the list short. Each add-back is a question someone will ask later.
A worked illustration
Illustration only, with assumed figures, not market data. Consider a company with $4 million in revenue, a 40% gross margin and $1.1 million in overhead.
| Line | Before | After |
|---|---|---|
| Revenue | $4,000,000 | $4,000,000 |
| Gross margin | 40% ($1,600,000) | 43% ($1,720,000) |
| Overhead | $1,100,000 | $1,060,000 |
| EBITDA | $500,000 | $660,000 |
A three-point margin gain from repricing and mix, plus a modest overhead review, lifts EBITDA by $160,000, or 32%. If someone were to apply an assumed multiple to those earnings, the effect on implied value could be several times the earnings gain. That is the arithmetic that makes margin work worthwhile, but any real multiple is a judgement made by buyers and valuators, and the gain only counts once it has been held for some time.
A 30-day margin sprint
If the ten areas feel like too much, run a 30-day sprint on the three that usually pay back fastest.
- Week 1: pull a year of discounts and credits, and calculate gross margin by service line.
- Week 2: reprice the five highest-volume items whose prices have not moved since costs last rose, and write a short explanation for customers.
- Week 3: compare materials bought with materials billed for the last quarter, and introduce a simple change-order note for extras.
- Week 4: write the discount rules, agree them with whoever gives discounts, and add a discount line to the monthly accounts.
At the end of the month you will have a baseline, three changes in place, and a way to see whether they hold.
How to keep the gains
Margin improvements fade unless they become routine. Put four numbers in your monthly management accounts: gross margin by service line, overhead as a share of revenue, discounts given, and receivable days. Review them with your managers every month, and re-check prices every year. Our monthly value dashboard guide shows where these fit alongside the other value drivers.
When to get help
If you can produce the numbers in this guide and act on them, you may not need a consultant. If the numbers are hard to get, or the changes keep slipping behind daily work, our margin and EBITDA service does the analysis with you and tracks the results monthly. Call or text (604) 632-4959 to talk it through.
Frequently asked questions
What is the difference between gross margin and EBITDA?
Gross margin is revenue minus the direct cost of delivering what you sell, such as materials and direct labour. EBITDA goes further and also subtracts overhead, but not interest, taxes, depreciation or amortization. Gross margin tells you whether the work is priced well; EBITDA tells you whether the whole company is run efficiently.
How often should prices be reviewed?
At least once a year, and whenever a major cost such as wages, materials or insurance changes noticeably. Many owners review annually but act only every few years, which is where margin quietly erodes.
Should I cut staff to improve EBITDA?
Only if roles are genuinely unnecessary. Cutting service, sales or training capacity often raises EBITDA for a year and lowers it after that, which is worth less to anyone reading your numbers.
Who should calculate normalized EBITDA?
Your accountant should be involved, and a valuator or the buyer's advisers will form their own view in any transaction. Keep the add-back list short and documented so the discussion is easy.
Sources
- CPA Canada (2026-10-23)