Ecom CFO Notebook - Q1 profit data: the four reasons your EBITDA moved

Ecom CFO Notebook is a (mostly) strategic finance publication for $10M+ ecommerce operators.

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Last week's revenue cohort data was the appetizer. Median revenue up 3.5%. Under-$10M cohort down 15%. Over-$50M cohort up 50%.

But revenue = vanity.

Today you have the FULL Q1 benchmark report — and we've significantly overhauled it from previous editions.

More data, less commentary - even made it landscape mode for maximum data!

Expanded dataset across every cohort. Monthly and quarterly trend lines instead of static snapshots. Removed the noisier metrics.

I’m going to explain one of the new elements of the report, but if you just want the thing, here you go…

Ok, so what’s new?

I was always hesitant to include an EBITDA Margin Bridge in our report because it’s a little complicated.

But I find myself explaining this to clients constantly — not just what changed, but why the bottom line actually moved and the total impact.

It answers a really important question: why did my EBITDA margin change vs. last [period]?

Here’s a quick explainer video:

Sometimes these bridge charts are visualized more like waterfalls but I found this view makes more sense.

It’s more complicated than it looks but it takes the total change in your EBITDA margin and splits it into four components:

• Gross margin change — did product become cheaper or pricier as a percentage of sales?

• Variable selling change — did acquiring and pick/pack/ship become more or less efficient? (ads, marketplace fees, outbound shipping)

• G&A leverage — did your revenue grow faster than your overhead, so the same fixed costs ate up a smaller share of every dollar?

• G&A cost effect — did the overhead dollars themselves go up or down?

The four pieces sum to the total change in EBITDA margin. Bars to the right of zero helped margin, bars to the left of zero hurt it.

Here's the cohort summary for March 2026 vs. March 2025:

Every cohort improved EBITDA margin year over year. That's the good news. But the reason each cohort improved is completely different — and the difference matters for what you do next.

The over-$50M cohort is a clean example. Their revenue growth gave them 4.2 percentage points of leverage on overhead. But they also added 4 percentage points of cost — new hires, agencies, whatever it was. The two basically cancelled out. Their net G&A contribution to EBITDA margin was almost zero, but if you only looked at that net number, you'd miss that they grew and spent the leverage gain back.

Three brands, three completely different stories

We pulled the actual P&Ls for a handful of brands in the under-$10M cohort to see what was driving their G&A improvements.

The numbers below are from real clients. Each brand ended up with a similar margin improvement, but the path they took to get there couldn't be more different.

If all you saw was "G&A margin up 3-5pp," you'd assume these brands were running the same playbook, but that’s not the case. One did it through pure cost discipline. One re-architected the business by going asset-light during a revenue decline. One let growth do the work and rebalanced what their overhead was paying for.

This is what's useful about building bridges for each component.

The cohort-level EBITDA bridge told us G&A leverage moved margin for the under-$10M brands. The G&A breakdowns above tell us how that happens. 

If we wanted to keep going, we could. The cost-discipline brand A’s $20K payroll savings has its own bridge with headcount changes, hours reductions, and benefits cuts. The asset-light brand B’s facility exit breaks into rent, utilities, and one-time termination fees. The depth depends on what you're trying to figure out and how far you want to chase it.

What I'd look for in your bridge

If you run this on your own P&L, here's what I'd pay attention to first.

If your G&A leverage is positive but your G&A cost effect ate it — you grew, but you spent the growth. That's the most common pattern I see in the $10M-$50M range. The conversation with your team isn't about cutting. It's about whether the new spend is producing anything yet, and what the timeline is for it to show up.

If your gross margin moved more than 2 points in either direction, that's the one to chase before anything else. Everything downstream — contribution margin, EBITDA — is built on top of it. A 2-point gross margin swing on a $20M brand is $400K.

If all four components are slightly negative, that's the most dangerous pattern because nothing looks broken. No single line item screams for attention. But the cumulative drag is real, and it usually means the business is slowly getting more expensive to run without anyone noticing.

Run this on your own P&L

Once you've looked at the report, you can run the same analysis on your own books. I built a prompt for it. Paste your P&L for two periods, and it'll compute the four bridge components, tell you the single biggest driver, and ask you three diagnostic questions about whatever moved the most.

You're acting as my fractional CFO. I want you to build me an Operating Margin Bridge — a four-component breakdown that explains why my EBITDA margin changed between two periods.

# How to use this

1. Tell me the two periods you want compared (e.g., "March 2026 vs March 2025" or "Q1 2026 vs Q1 2025").

2. Paste your P&L for both periods below this prompt — any format works (QuickBooks, Xero, NetSuite, plain table).

3. I'll ask clarifying questions before computing.

# How I'll read your P&L

I'll map every account into one of these seven buckets:

1. Net Revenue — Gross sales minus refunds, returns, discounts. Shipping income counts as revenue. Gift cards issued in lieu of cash refunds count as refunds.

2. COGS — Inventory, packaging, freight-in, production. NOT customer-facing outbound shipping (separate bucket). NOT marketplace fees (separate bucket). If your bookkeeper buried customer shipping in COGS, I'll move it.

3. Variable Ad Spend — Paid acquisition only: Meta, Google, TikTok, Amazon Ads, affiliate commissions. NOT marketing salaries or agencies — those are Fixed Marketing.

4. Marketplace Fees — Shopify, Amazon referral/FBA, Klaviyo and other email-platform fees, payment processing.

5. Outbound Shipping — DTC shipping labels, 3PL pick-and-pack.

6. Fixed Marketing — Marketing salaries, agency retainers, content/influencer/sponsorship spend, marketing consulting.

7. G&A — Everything else: non-marketing payroll, rent, software, professional services, R&D, insurance.

If any account is ambiguous, I'll ask before guessing.

# What I'll compute

For each period:

- Gross Margin % = (Net Revenue − COGS) ÷ Net Revenue

- Variable Selling % = (Ad Spend + Marketplace Fees + Outbound Shipping) ÷ Net Revenue

- G&A % = (G&A + Fixed Marketing) ÷ Net Revenue

- EBITDA Margin % = Gross Margin − Variable Selling − G&A

Then the four bridge components, in percentage points:

1. ΔGross Margin = current GM% − prior GM%

2. ΔVariable Selling = prior Variable Selling % − current Variable Selling %

3. G&A Leverage = prior G&A × (1/prior Revenue − 1/current Revenue)

4. G&A Cost Effect = (prior G&A − current G&A) ÷ current Revenue

The four sum to the change in EBITDA margin.

# What I'll give you back

1. A summary table: prior EBITDA margin, current EBITDA margin, the four bridge components in pp, and the total.

2. A plain-English narrative of each component, no jargon.

3. The single biggest driver of the change — named explicitly.

4. Three diagnostic questions tailored to whichever component moved the most.

5. Flag anything weird: accounts I couldn't bucket confidently, totals that don't reconcile, numbers that look like data-entry errors.

# Paste your P&L below:

[paste here]

Here’s the report link again so you don’t have to scroll up

— Sam

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