You Can't Improve What You Don't Measure
You do not need a finance degree to monitor business health — just a handful of key performance indicators (KPIs). Here are seven that matter for small businesses, defined plainly.
The Seven
- Gross & Net Margin — what you keep at each layer (see our margin guide).
- Break-Even — the revenue floor you must clear (see our break-even guide).
- Burn Rate — cash leaving per month. Burn = Total Monthly Costs − Non-Cash Costs
- Runway — Runway = Cash on Hand ÷ Burn Rate. Two months of runway is a red alert.
- Customer Acquisition Cost (CAC) — total sales/marketing spend ÷ new customers.
- Client Lifetime Value (LTV) — average revenue per client × expected relationship length.
- Accounts Receivable Days — average days to collect. Lower is better for cash.
Why Trends Beat Benchmarks
A generic "good" margin means little for your situation. What matters is direction: is margin rising? Is runway lengthening? Is CAC falling relative to LTV? Track each monthly and watch the slope.
A Minimal Dashboard
| KPI | Healthy Signal |
|---|---|
| Net margin | Stable or rising |
| Runway | > 3 months minimum |
| LTV:CAC | Above 3:1 |
| AR days | Shrinking |
Start tiny: If you track only two things this quarter, track net margin and cash runway. They predict survival better than any vanity metric.
KPIs exist to trigger action, not decorate a spreadsheet. When one moves the wrong way, you already know which lever to pull.