Here is the founder question: "Our lead investor keeps saying she wants to see a 20% EBITDA business before she puts more money in. My accountant's version of the number is 15%, the version in our deck says 20%, and both were prepared honestly. What does 20% EBITDA actually mean for a supplement brand like ours, and which number is real?" Here is the direct answer: 20% EBITDA means that for every £100 of revenue, £20 is left after everything it costs to run the business, before interest, tax, depreciation and amortisation. On £2m of net revenue, that is £400,000 of EBITDA, and it is one of the figures investors, lenders and buyers may use. It is also a flexible number: in the illustrative example below, the same £2m business can show 15%, 18% or 20% depending on which supported adjustments are accepted, so the percentage matters less than the bridge behind it. This post shows you what the number means, what sits inside it and outside it, and what has to be true before a 20% claim survives a proper look.
We are specialist social commerce accountants for UK ecommerce brands generating £1m to £20m, and this question matters in funding conversations. Some founders treat EBITDA as a badge and some investors use it as a filter, though it is neither: it is a calculation built on top of your accounts, and the calculation is only as good as the lines underneath it. If the shape of your P&L is still off, fix that first. We walked through the structure in our post on how a 7-figure supplement brand should structure their P&L.
Here's the Short Version
- 20% EBITDA is £20 of EBITDA per £100 of revenue: £200,000 at £1m of sales, £400,000 at £2m, and £1m at £5m. It is a margin, not cash
- The same brand can show three different EBITDAs: reported, adjusted, and the version a buyer will accept. Ask which one you are being shown, then ask for the bridge
- EBITDA is not a required line in your filed accounts. It is an alternative performance measure, so ask how it was calculated and request the bridge
- High adjusted EBITDA margins have been reported in nutrition, but they move. BellRing reported 20.8% for FY2025, while its latest FY2026 outlook is about 12%
- Applied Nutrition expects about 27% for FY2026 and about 24% for FY2027, as whey protein costs rise and US sales take a bigger share
- EBITDA leaves out real money: depreciation, interest and corporation tax at up to 25%. On the illustrative £2m example below, a 20% EBITDA margin becomes a profit after tax margin of about 12.4%
- Check whether founder pay sits inside the number, and never confuse any EBITDA margin with cash in the bank
What 20% EBITDA Actually Means
In plain English, EBITDA strips four things out of your profit. Interest, the cost of borrowed money. Tax, the bill that follows profit rather than causes it. Depreciation and amortisation, which spread the cost of things you bought to run the business, equipment, machinery, fit-out, capitalised software, across the years they serve. What is left is a measure of operating performance before financing, tax, depreciation and amortisation. That is one reason investors may use it. It compares the engine, not the paintwork, and two brands with completely different debt and tax histories can sit on the same line.
As a margin, 20% converts to pounds at any scale you like:
| Revenue, net of VAT | 20% EBITDA |
|---|---|
| £1m | £200,000 |
| £2m | £400,000 |
| £5m | £1m |
| £10m | £2m |
Every extra £1m of revenue at a 20% margin is another £200,000 of EBITDA, which is why the percentage is worth arguing about properly.
A point that can surprise founders is that EBITDA is not a required line in your filed accounts, and the term is not defined in the accounting standards your accounts use. Different calculations can produce different figures, so the sentence "we run at 20% EBITDA" is not a fact until you have seen the bridge behind it. The next section shows you how quickly that bridge changes the number.
The Same Brand, Three Different EBITDAs
Illustrative example with synthetic numbers. A £2m brand's management accounts show EBITDA of £300,000. That is a 15% business. Preparing for a raise, the founder's deck presents an adjusted version: it adds back £60,000 of genuinely one-off costs, say a warehouse move that went wrong, and £40,000 of founder pay above the market rate for the role. Now the deck says £400,000, a 20% business. Then a buyer's quality of earnings team runs the same numbers, accepts the one-off with evidence, but pushes back on the founder adjustment on the grounds that a manager will need paying anyway. Their version lands at £360,000: an 18% business.
| Version | EBITDA | Margin |
|---|---|---|
| Reported EBITDA, from the management accounts | £300,000 | 15% |
| Add back: one-off warehouse relocation | £60,000 | |
| Add back: founder pay above market rate | £40,000 | |
| Adjusted EBITDA, the deck version | £400,000 | 20% |
| Buyer's version, one-off accepted and founder add-back rejected | £360,000 | 18% |
Same year, same underlying performance, three honest numbers. Nobody in that story is lying. They are drawing the line in different places, and where you draw it is worth real money: at a hypothetical five times multiple, the gap between the 15% version and the 20% version is £100,000 of EBITDA, which is £500,000 of headline price. When we wrote about preparing your financials before you sell, this argument, the add-back schedule, was half the work.
Two habits to take from it. First, when anyone quotes you an EBITDA margin, ask which version it is and for the schedule of adjustments, then test each one: did the "one-off" also appear last year? Second, check whether founder pay sits inside or outside the number. A brand presenting "20% before director pay" is presenting a number that quietly assumes you work for free. Put a market salary in, then look again. Getting that salary right at this scale is its own exercise, and we covered it in what a 7-figure supplement brand should pay its founder.
Is 20% Realistic for a Supplement Brand?
Short answer: yes, but compare like with like. BellRing Brands, the group behind Premier Protein, reported adjusted EBITDA of $481.6m on net sales of $2.32bn in FY2025, a margin of 20.8%. Its November 2025 long-term algorithm was a margin of 18% to 20%, but its updated FY2026 outlook, issued in August, is $275m to $295m of adjusted EBITDA on $2.335bn to $2.375bn of net sales, a margin of about 12%, after inventory-related charges and continued input cost pressures. Applied Nutrition, the UK sports nutrition brand listed on the London Stock Exchange, expects FY2026 revenue of about £160m and adjusted EBITDA of about £43.3m, a margin of about 27%, excluding amounts from its June acquisition. Its FY2027 guidance is about £205m of revenue and £49m of adjusted EBITDA, a margin of about 24%, with US mix and higher whey protein costs weighing on margin. Our wider review gave a rough 5% to 15% EBITDA band depending on category and channel mix, which we wrote up in what 200 UK DTC brands taught us about scaling profitably.
These figures show that 20% adjusted EBITDA is achievable, and that reported margins can move fast in both directions. They do not establish a market median, a top decile threshold or a best in class benchmark for a £2m brand. So treat 20% as a serious target to model, not a label the market hands out.
Why can supplements support strong margins? Own brand pricing and repeat purchases can help. The margin still has to absorb creator commissions, returns, expiry costs and platform fees across TikTok Shop, Amazon and your own site. Twenty percent is possible, but it depends on your own cost stack.
What Has To Be True To Hit 20%
Here is the shape, with an illustrative example and synthetic numbers. A brand at £2m of net revenue lands at exactly 20% like this:
| Line | Amount | Share of revenue |
|---|---|---|
| Revenue, net of VAT | £2,000,000 | 100% |
| Cost of sales: landed product and fulfilment | (£600,000) | 30% |
| Gross profit | £1,400,000 | 70% |
| Marketing: ads and creators | (£450,000) | 22.5% |
| People, including market-rate founder pay | (£270,000) | 13.5% |
| Platform, payment and app fees | (£130,000) | 6.5% |
| All other overheads | (£150,000) | 7.5% |
| EBITDA | £400,000 | 20% |
Read it as a set of assumptions, because that is what it is. A 70% gross margin is an assumption in this synthetic example, not a category benchmark. Marketing at 22.5% blends paid social with creator and affiliate payouts. TikTok Shop's current standard commission is 9% including VAT, although some categories have different rates, and card fees and app subscriptions sit inside the platform line. People at £270,000 covers a small team, including market-rate founder pay, and every other overhead, software, compliance, testing, insurance, professional fees, fits in the final £150,000.
Now watch the assumptions move. A two point rise in landed cost takes £40,000 off EBITDA, leaving £360,000 or 18%. A further three point rise in advertising takes another £60,000 off, leaving £300,000 or 15%. If this illustrative brand then hires a finance lead at £60,000, EBITDA falls to £240,000, or 12%. None of those moves means the plan was wrong. It means 20% was a set of assumptions, and assumptions have a way of moving in the same direction at once. Applied Nutrition's latest guidance shows how input costs and sales mix can compress a margin even while revenue grows, with its expected margin slipping from about 27% to about 24% as whey protein costs rise. Model the timing and cost of your first finance hire as growth takes hold, which we wrote about in when a 7-figure supplement brand should hire their first CFO.
What EBITDA Leaves Out, and Why 20% Is Still Not Cash
Continue the same illustrative example. EBITDA of £400,000, less £50,000 of depreciation and amortisation and £20,000 of interest, gives profit before tax of £330,000. If taxable profit is also £330,000 and the main rate of 25% applies, corporation tax is £82,500. Profit after tax is £247,500, a margin of about 12.4%.
| Line | Amount |
|---|---|
| EBITDA | £400,000 |
| Depreciation and amortisation | (£50,000) |
| Interest | (£20,000) |
| Profit before tax | £330,000 |
| Corporation tax at 25% | (£82,500) |
| Profit after tax | £247,500 |
Two notes before the cash point. Corporation tax is charged on taxable profit, and depreciation is not an allowable deduction, capital allowances take its place, so the two figures rarely match to the pound; the example assumes they do. And the rate ladder matters. For a 12-month accounting period with no associated companies, the small profits rate is 19% at £50,000 or less, marginal relief applies above £50,000 and up to £250,000, and the main rate is 25% above £250,000. These thresholds are reduced for short accounting periods and associated companies. The point here is that tax is a percentage of profit you can see coming, and it should never surprise you.
Even the £247,500 is not a bank balance, and this distinction can be missed when an EBITDA margin is quoted without its cash context. Three things stand between profit and spendable cash. In this illustrative model, all £2m of net sales are assumed to be standard-rated, creating £400,000 of output VAT before input VAT recovery, and the actual VAT treatment depends on the products sold. At the 20% rate, output VAT is one sixth of VAT-inclusive takings, and the net VAT payment is usually due one month and seven days after the VAT period ends. Stock comes second: a growing brand buys next quarter's inventory from this quarter's cash, so the profit sits on a shelf before it sits in a bank. Corporation tax timing comes third: with taxable profits below £1.5m, the bill is due nine months and one day after the end of the accounting period, which is generous and dangerous in equal measure unless you have reserved for it monthly. Play it straight and you will find that a 20% EBITDA brand can still need an overdraft, while a 12% brand with tight cash discipline sleeps fine. Cash is a separate plan, and we wrote about the gap in why you can be profitable and still broke.
How To Read Any EBITDA Claim, Including Your Own
Five checks, whether the claim comes from a founder, a broker or your own deck:
- Get the bridge. Start point, every adjustment, and the evidence for each. A cost that is genuinely one-off happens once; if it is back next year, it was never one-off
- Put a market salary in first. Ask whether founder pay is inside the number. If it is not, deduct a real salary for the job, then look at the margin again
- Tie it back to the accounts. An EBITDA that cannot be reconciled to the management accounts is a wish with a percentage sign. Monthly management accounts are the fix, and we walked through reading your first set of management accounts here
- Look below the line. Depreciation, interest and tax are real claims on the same money, and the cash cycle of VAT, stock and tax reserves decides whether the margin ever becomes a bank balance
- Stress the two lines that move. In this supplement brand model that is landed cost and advertising. If 20% only survives when both behave, it is not a plan, it is a hope
FAQ
What does 20% EBITDA mean in pounds?
For every £100 of revenue, £20 is left after the cost of running the business, before interest, tax, depreciation and amortisation. That is £200,000 at £1m of sales, £400,000 at £2m, and £1m at £5m. It is a margin, not cash, and the figure depends on which adjustments the person quoting it has included, so always ask to see the bridge.
Is 20% EBITDA good for a supplement brand?
Yes, 20% is a strong adjusted EBITDA margin. BellRing reported 20.8% in FY2025, but its latest FY2026 outlook is about 12%. Applied Nutrition expects about 27% for FY2026 and about 24% for FY2027. Our wider review gave a rough 5% to 15% EBITDA band depending on category and channel mix. What matters is whether your 20% survives the adjustment schedule.
Why can a business with 20% EBITDA still run out of cash?
Because EBITDA is not cash. It ignores VAT, stock, capital spending and tax timing. At the 20% VAT rate, one sixth of VAT-inclusive takings is output VAT before input VAT recovery. For companies with taxable profits up to £1.5m, corporation tax is due nine months and one day after the accounting period ends. You also pay for equipment, software, stock and marketing before those costs turn into sales.
The Bottom Line
A 20% adjusted EBITDA margin is a strong claim, as long as it survives the bridge. In the illustrative example, reported, adjusted and buyer-accepted versions of the same business sit five points apart, and at a positive valuation multiple that difference affects headline value. So build the number from a clean P&L, keep founder pay inside it, know which costs are genuinely one-off, and remember that the margin and the bank balance answer different questions. EBITDA tells you what the model can produce. The accounts tell you what it did. The bank tells you whether it was real.
If you want your EBITDA built properly, with the bridge, the evidence behind every adjustment and a cash plan underneath it, we can help. We are specialist social commerce accountants for UK ecommerce brands generating £1m to £20m, and rebuilds like this are what our supplement accountants do. Book a call and bring your last 12 months of figures, and we will build the version that survives a proper look.