The 7 Numbers Every Business Owner Should Know

You do not need to understand every line of a financial statement to run a healthy business. You need to watch a small set of numbers, and watch them every month. When these seven move in the right direction, your business is working.

1. Cash on hand

The first number is the simplest. How much money is actually in the bank, today, that is yours to use. Not revenue, not what is owed to you. Cash. Most businesses do not fail because they are unprofitable. They fail because they run out of cash.

2. Revenue

What you brought in this month, and how it compares to last month and the same month last year. One month tells you little. The trend tells you everything.

3. Gross profit margin

What is left after the direct cost of delivering your product or service. If you sell something for 100 dollars and it costs you 40 to deliver, your gross margin is 60 percent. When this number slips, you are working harder for less.

4. Net profit

What is left after every expense, including the ones that are easy to forget. This is the number that tells you whether the business is actually making money, not just moving it.

5. Owner pay

What you are actually paying yourself. Too many owners run their business for years and quietly pay themselves last, or not at all. Your pay is a real expense and it belongs in the plan.

6. Accounts receivable

The money customers owe you but have not paid yet. Revenue on paper is not cash in the bank. When this number grows, your cash is stuck in other people's hands, and you need to go get it.

7. Runway

How many months you could keep the lights on if income stopped today. Runway turns a vague sense of worry into a specific number, and a specific number is something you can actually manage.

Watch them together, every month

Any one of these numbers can mislead you on its own. Watched together, once a month, they give you the truth about your business. That is what a monthly review is for, and it is what turns numbers from a source of stress into a tool you use to grow.

We built a short free guide that walks through all seven with the questions to ask about each. If you want the numbers working for you instead of against you, that is the place to start.