The six numbers every business owner should know by heart
Not your turnover. Six numbers that between them explain whether the business is actually working — and most owners can name two of them.
Ask a business owner how the business is doing and you usually get a turnover figure. Turnover is the least informative number in the business. It tells you how much money moved, not whether any of it stayed, not whether you can survive a slow quarter, and not what you should do differently on Monday.
These six do. Work them out once, then check them monthly. It takes about an hour the first time and fifteen minutes a month after.
1. Gross margin percentage
What it is: (Revenue − direct cost of what you sold) ÷ Revenue × 100.
Why it matters: it is the ceiling on everything. Every rupee of rent, salary, marketing and profit has to come out of this margin. Two businesses with identical turnover and different gross margins are not similar businesses; they are different businesses wearing the same clothes.
What to do with it: track it by product or service line, not just overall. Almost every business discovers that one line it is proud of is carrying a margin so thin it is effectively a hobby, and another it barely promotes is where the money actually is.
2. Monthly fixed cost
What it is: everything you pay whether you sell anything or not. Rent, salaries, EMIs, subscriptions, electricity base load, insurance.
Why it matters: this is the number that decides how much risk you can carry, and it is the number that quietly grows. Nobody adds ₹40,000 a month at once; they add ₹3,000 eleven times.
What to do with it: list it line by line once a quarter and ask, honestly, what each line earned.
3. Break-even revenue
What it is: Monthly fixed cost ÷ Gross margin percentage.
Why it matters: this is the single most clarifying number in the business. It converts a vague anxiety about money into one specific figure you either cross this month or you do not.
Fixed cost ₹2,40,000 a month, gross margin 40% → break-even is ₹6,00,000 in revenue. Below that you are funding the business from savings, whatever the turnover feels like.
What to do with it: write it on the wall. Everyone who sells should know it. It turns "sell more" into a target.
4. Cost to get one customer
What it is: everything spent on getting customers in a period ÷ number of new customers won in that period. Include advertising, and include the value of your own time if you are the one selling.
Why it matters: without it you cannot tell whether marketing is an investment or a leak, and you cannot decide how much you can afford to spend to win the next one.
5. What a customer is worth over their lifetime
What it is: average order value × how many times they buy in a year × how many years they typically stay × gross margin percentage.
Why it matters: compared against number four, this is the whole economic engine of the business in one ratio. If a customer is worth ₹18,000 in margin over their life and costs ₹1,200 to acquire, you should be spending far more on acquisition than you are. If they are worth ₹900 and cost ₹1,200, no amount of marketing effort will fix it — the problem is retention or pricing.
What to do with it: most small businesses under-invest in acquisition because they measure the first sale rather than the relationship. This number is the correction.
6. Cash runway in months
What it is: cash available ÷ average monthly cash burn. Cash, not profit. Money in the account you can actually spend.
Why it matters: profitable businesses close because of cash, not profit. A big receivable that pays in ninety days does not pay this month's salaries.
What to do with it: if it is under three months, that is the only problem in the business worth working on this week — before growth, before marketing, before anything.
The one-hour setup
One spreadsheet, six rows, one column per month. Fill in last month tonight. You will learn more about your business in that hour than in the last year of watching the bank balance, and the second month takes fifteen minutes.
What changes once you know them
Decisions get faster and less emotional. Should you take the low-margin bulk order? Check number one. Can you afford another salary? Check numbers two and three. Should you spend more on getting found? Check four against five. Should you take this project even though the client pays late? Check six.
You do not need an accountant to tell you these. You need to know them yourself, by heart, so that the answer arrives in the meeting rather than a week after it.
