12 Business Metrics You Need to Know
To monitor your business’s health, understanding key financial metrics is essential. Failure to do so can result in mingling assets, tax penalties, overlooked expenses, and difficulties paying bills and employees. Successful business owners analyze data to gain insights into their business’s performance, set goals, track progress, and make necessary adjustments. So, which metrics should you pay attention to? Here are some valuable ones:
1. Cash flow: Measures money movement in and out of your bank accounts.
2. Accounts payable: Total unpaid bills that need to be settled, appearing as a liability on your balance sheet.
3. Accounts receivable: Money owed to your business by customers for products or services sold.
4. Direct costs (a.k.a. costs of goods sold): Costs related to the production of a specific product or service, excluding indirect expenses like marketing or rent.
5. Cash burn rate and runway: Measures the rate at which a company uses up cash reserves and how long the current burn rate can sustain the business.
6. Net profit: Operating income minus taxes and interest, representing the earnings left after expenses.
7. Gross margin: Difference between the cost of making your products/services and the revenue generated.
8. Lifetime value (LTV): Average monetary value of a customer during their tenure as your customer.
9. Customer acquisition costs (CAC): The expense required to gain a new customer.
10. Cash-assets ratio: Calculates liquidity by dividing cash and cash equivalents by liabilities.
11. EBITDA-assets ratio: Measures a company’s ability to generate income by comparing EBITDA to its assets.
12. Debt service coverage ratio: Indicates a business’s ability to meet debt obligations based on cash position and operating income.
Tracking these metrics allows for focused decision-making, aiding in business growth and survival. Explore our other business management resources to apply these metrics effectively, such as creating a business strategy, ways to grow your business, and setting business goals.
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I’m Andrew Brooks, a seasoned finance consultant from the USA and the mind behind phonenumber247.com.
My career is built on a foundation of helping individuals and businesses thrive financially in an ever-changing economic landscape. At phonenumber247.com, my aim is to demystify the complex world of finance, providing clear, actionable advice that can help you navigate your financial journey with confidence. Whether it’s personal finance management, investment strategies, or understanding the nuances of market dynamics, I’m here to share insights and tools that can propel you towards your financial goals.
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