5 Financial KPIs Every Small Business Owner Must Track
Revenue is vanity, profit is sanity, but cash is king. The 5 metrics that actually tell you if your business is healthy.
By Rachel Green · Biz Dev
· 1 min read
Startups
You don't need a finance degree to run a business, but you do need a dashboard. staring at your bank balance is not financial management.
1. Gross Margin
(Revenue - Cost of Goods Sold) / Revenue. If this is slipping, you are either underpricing or your costs are rising. Fix this first.
2. Churn Rate
For recurring revenue models, churn is the hole in the bucket. If you lose 5% of customers a month, you need to grow 60% a year just to stand still.
3. Days Sales Outstanding (DSO)
How long does it take to get paid? If your DSO is 45 days but your payables are due in 30, you have a cash crunch gap that needs financing.