The Profit Paradox: Why $100M Companies Make Less Than $50M Ones

The most shocking discovery for mid-market business owners: their profit margins actually decrease as revenue grows from $50M to $150M. This isn't a temporary dip - it's a structural problem.

The Numbers Don't Lie:

• Companies at $50M average 12-15% EBITDA margins

• Same companies at $100M drop to 8-12% margins

• At $150M, many plateau around 6-10%

Where Profits Disappear:

• Administrative overhead grows faster than revenue

• Middle management layer adds cost without proportional value

• Systems complexity requires expensive solutions

• Competitive pressure forces price concessions

What Most Owners Do:

• Cost-cutting initiatives that hurt growth

• Eliminating "non-essential" services customers value

• Reducing staff and overloading remaining employees

• Shopping for cheaper suppliers (often reducing quality)

The Real Solution

What We Find Works: Companies that grow sales systematically see margins improve because revenue scales faster than costs.

How Sales Growth Restores Profits:

• Fixed costs stay fixed while revenue grows

• Higher volume improves supplier negotiating power

• Growth attracts better talent who drive efficiency

• Successful companies can charge premium prices

The Math: If you have $2M in fixed monthly costs and grow sales from $8M to $12M monthly, your margin improvement pays for significant sales investment.

Real Example: A $120M service company saw margins drop from 14% to 9% over three years. After implementing systematic sales growth (28% increase in year one), margins recovered to 16% - higher than they'd ever been.

The Bottom Line: You can't cut your way to prosperity, but you can grow your way to better margins.