When it comes to financial planning, the two metrics you hear about most are revenue and EBITDA. Although connected they are showing completely different metrics: revenue shows how much you’re selling, and EBITDA shows how efficiently you’re running the business.
If you’re working on next year’s budget, aligning department goals, or preparing a board pack, you need to be clear about which metric should drive your planning. Focusing on the wrong one can lead to inflated forecasts, misallocated resources, or margin erosion.
Read more: A Complete Guide to Financial Statement Analysis for Strategy Makers
Revenue is essential for tracking market traction and growth. But without visibility into EBITDA, you risk pushing volume at the expense of profitability. On the other hand, over-focusing on EBITDA might limit investment in sales, R&D, or new markets.
This article explains when to prioritize each metric, how to connect them in a single planning model, and why finance teams in complex organizations use both to guide strategic decisions with confidence.
What Is the Difference Between Revenue and EBITDA?
Revenue is your top line. It shows the total money your business earns by selling goods or services. It tells you how much you’re selling but not how well you manage costs.
EBITDA stands for Earnings Before Interest, Taxes, Depreciation, and Amortization. It’s a way to measure how well your company runs. It removes things like taxes and loan payments to focus on core operations.
Think of revenue as how much power your engine makes. EBITDA is how much power actually reaches the wheels.
You need both to understand business performance.
Revenue: The growth focus
Revenue matters most when:
- Launching new products
- Expanding into new markets
- Tracking sales by channel or region
- Aligning growth goals with sales
Top-line growth is exciting. It’s the number most CEOs talk about first. But growth can hide problems. You may offer discounts or spend more to enter new markets. That can shrink your profit margins.
Revenue also fluctuates depending on seasonality, currency movements, and one-time deals. This makes it important to compare revenue trends alongside cost and margin data.
We can see on Krka example, a pharma company in Slovenia how this looks like in real life. Krka grew revenue 12% in 2023, but profits stayed flat due to rising marketing and logistics costs. If they focused only on top-line growth, the true financial picture would be misleading.
EBITDA: The efficiency view
EBITDA is more useful when:
- Looking at how your business runs day to day
- Checking the impact of cost-saving efforts
- Reporting to investors or preparing for a merger
- Comparing business units or countries
It shows if your company is operating well. It removes factors you can’t always control, like interest rates or tax changes.
EBITDA is also a favorite metric for private equity firms and investors. It reflects operating performance without being influenced by how a company is financed or structured.
In Gebrüder Weiss example,we see a logistics company growing its EBITDA margin in 2022. They did this by cutting fuel costs and managing staff better. Revenue didn’t change much, but profits improved.
That’s what EBITDA reveals, performance improvements that don’t show up in the revenue line.
Why Finance Teams Need Both
Revenue and EBITDA tell different parts of the story. Focus on only one, and you risk making the wrong choices.
Chasing revenue alone can lead to low-margin deals. Chasing EBITDA alone can lead to underinvesting in future growth.
Most finance teams plan revenue using volume and price. Then they model EBITDA by adding in costs, staff plans, and operating expenses. This gives a fuller picture of both potential and risk.
When comparing performance across departments or countries, using both metrics ensures a balanced view. For example, one unit might have high revenue and low EBITDA. Another might be smaller in revenue, but more efficient.
Podravka, a food company, used volume and pricing to plan revenue. But they watched EBITDA closely because packaging and ingredient costs were rising.
How Modern FP&A Tools Connect the Dots
Old planning tools rely on Excel, ERP, and BI dashboards. These systems don’t work well together. You end up with disconnected plans.
Modern FP&A tools like Farseer change that. They help you:
- Plan sales using business drivers like units and price
- Model costs based on real operations
- Simulate how changes affect EBITDA
- Update forecasts with live data
- Share scenarios with business owners for faster decisions
These tools link the revenue plan to the full P&L. This means changes in volume or price instantly update gross margin, opex, and EBITDA.
Let’s say you are a mid-sized manufacturer that uses a modern FP&A like Farseer, to model three revenue scenarios. The tool recalculates EBITDA automatically, working across plants and product lines, with no manual edits needed. This saves time and reduces errors.
Don’t stop at revenue or EBITDA alone
To get the full picture, track other key ratios:
- Gross margin: Revenue minus COGS
- Contribution margin: Revenue minus variable costs
- EBITDA margin: EBITDA divided by revenue
- Opex ratio: Operating expenses divided by revenue
- Net revenue retention: Revenue growth from existing customers
These metrics help explain what’s driving results. For example, is profit falling because of higher input costs or lower prices?
With centralized planning, teams can drill into each line. This means no more waiting for IT or BI teams to pull reports.
When combined with scenario planning, these metrics help teams choose between cost-cutting, pricing changes, or delaying investments.
Read more: Strategic Financial Planning That Actually Drives Results
Forecasting with Both Metrics in Mind
Planning is not just about guessing the future. It’s about being ready for it.
Here’s how to bring revenue and EBITDA into one plan:
- Start with revenue: Use volume and pricing to build your sales plan.
- Add costs: Tie costs like headcount, freight, and COGS to that plan.
- Create scenarios: Try best case, base case, and worst case.
- Adjust often: Use rolling forecasts to stay up to date.
- Get inputs from the business: Include production, sales, and procurement in planning.
This creates alignment across teams. Everyone works from the same numbers. It also improves accountability and accuracy.
For large companies, this is the only way to avoid reporting delays, conflicting data, and planning silos.
Strategic Planning Starts with the Right Metrics
Revenue shows if your business is growing. EBITDA shows if it’s healthy.You need both to plan well. Focus on just one, and you’ll miss what matters.
Companies that plan using both revenue and EBITDA:
- Make better forecasts
- Build more realistic budgets
- Avoid bad decisions
If you want to move past slow tools and manual work, connected planning is the next step.
Finance teams that invest in better forecasting tools often see:
- Faster month-end closes
- Better collaboration between departments
- More confidence in their numbers
Đurđica Polimac is a former marketer turned product manager, passionate about building impactful SaaS products and fostering connections through compelling content.
