Revenue Up 30%, Margin Down. Here’s Where It Went.

When revenue climbs but EBITDA thins, the money is usually leaking in the space between your teams — the approvals, rework, and handoffs that grow faster than sales. I call it Coordination Cost, and almost nobody puts a number on it.

The CFO slides the quarterly across the table. Revenue is up 30%. You start to smile, then your eye hits the bottom line. Margins are thinner than last year, on more business. Bigger, earning less. Nobody in the room says much.

Your gross margin is fine. Direct costs are fine. The money disappears between gross profit and net profit — in the layer where coordination lives.

💥 Coordination Cost is real money

Every extra approval. Every rework loop. Every “let me check with three people first.” Every project rebuilt because two teams held two versions of the plan. None of it is a line item. All of it lands in EBITDA.

Here’s a version I’ve watched play out. A commercial construction firm grew from $45M to $68M in three years and stayed busy the whole time. But net margin slid from 9% to 6%. The leak wasn’t in the field. It was in the back office, where every change order touched four people and no one owned the final call. They paid for that ambiguity twice: once in labor hours, once in delayed billing. On $68M, three points of margin is about $2M walking out the door in friction.

Why growth makes it worse, not better

More volume means more handoffs, more approvals, more chances for the same broken process to leak. You scale the revenue and the Coordination Cost at the same time. That’s why the top line looks great while the bottom line drifts the wrong way.

Where to look first

Don’t start with cost-cutting. Start with friction. Where does work stall waiting on a decision? Where do you rebuild things that were already “done”? Which handoffs reliably create rework? Find the three worst offenders. That’s usually where the margin went.

Revenue didn’t break your margins. It exposed what the operating model was already costing you.

If you’re growing but the bottom line is getting harder to defend, where do you suspect your leak is? Book 30 minutes on my calendar and I’ll share the diagnostic I use to find it.