Introduction

Most successful business owners I work with started tracking these KPIs right around the $500K revenue mark. By $1M+, these metrics become non-negotiable for sustainable growth.

1. Gross Profit Margin by Product/Service Line

What it is: Revenue minus direct costs, expressed as a percentage.

Why it matters: Shows which parts of your business actually make money.

Target range: Varies by industry, but consistent month-over-month improvement.

Key Takeaway: If you can't measure profitability by offering, you can't optimize your business mix.

2. Customer Acquisition Cost (CAC)

What it is: Total sales and marketing spend divided by new customers acquired.

Why it matters: Tells you if your growth is profitable or just expensive.

Track alongside: Customer lifetime value (should be 3:1 ratio minimum).

Pro Tip: Include ALL costs - salaries, software, advertising, events, even the coffee for sales meetings.

3. Days Sales Outstanding (DSO)

What it is: Average days it takes to collect receivables.

Why it matters: Directly impacts cash flow and working capital needs.

Calculate: (Accounts Receivable ÷ Revenue) × Days in Period.

Warning sign: DSO increasing month-over-month often signals collection problems or customer quality issues.

4. Current Ratio (Working Capital Health)

What it is: Current assets divided by current liabilities.

Why it matters: Shows your ability to pay short-term obligations.

Target range: 1.5-3.0 (industry dependent).

5. Revenue per Employee

What it is: Total revenue divided by full-time equivalent employees.

Why it matters: Measures operational efficiency and scalability.

Benchmark: Varies widely by industry, track your trend.

6. Cash Conversion Cycle

What it is: Days from cash outlay to cash collection.

Components: Days in inventory + DSO - Days payable outstanding.

Goal: Minimize without damaging relationships.

7. Monthly Recurring Revenue Growth Rate (for service businesses)

What it is: Month-over-month percentage growth in predictable revenue.

Why it matters: Shows business momentum and predictability.

Track: Both gross new MRR and net MRR (after churn).

Bonus: Rule of 40 (for SaaS and high-growth businesses)

What it is: Revenue growth rate + profit margin should exceed 40%. For example: 25% growth + 20% margin = 45% (good health)

Building Your KPI Dashboard

Start with these 7 metrics. Update weekly, not monthly. Share with your leadership team. Most importantly - take action when metrics move in the wrong direction.

Wrapping Up

The difference between successful and struggling businesses isn't revenue size - it's financial visibility. These KPIs give you the insight to make smart decisions quickly.

Your Turn: Which of these KPIs would have the biggest impact on your business decisions? Start tracking that one this week.

Need Help Setting Up Your Financial Dashboard?

Creating and maintaining these KPIs takes time and expertise. As a fractional CFO, I help growing businesses ($500K-$30M) implement these systems without the overhead of a full-time finance team. Learn more at www.GehCPA.com.