I've seen a $4M business nearly implode because the founder was tracking revenue and expenses but not the seven metrics that actually tell you whether your business is healthy. Revenue was growing 30% year-over-year. He thought everything was fine. Meanwhile, AR was aging out, gross margin was eroding, and his actual cash position was worse than it had been 12 months earlier.
You don't need 50 KPIs on a dashboard. You need seven, reviewed weekly, with someone (or something) watching for red flags between reviews. Here they are.
1. Cash Position
What it is: The total cash available across all your bank accounts right now. Not projected cash. Not cash plus receivables. Actual liquid cash you could spend today.
How to calculate it: Sum of all checking and savings account balances. That's it. Don't include money market funds with withdrawal restrictions or deposits in transit.
What good looks like: Enough to cover 3–6 months of operating expenses. For a business burning $80K/month, that's $240K–$480K.
Red flags: Cash position declining for three consecutive weeks. Cash below two months of operating expenses. A single week where cash drops by more than 25% of monthly burn.
2. Burn Rate
What it is: How much cash you spend per month, net of revenue. Gross burn is total monthly spend. Net burn is spend minus revenue. Net burn is the number that matters for runway.
How to calculate it: Total cash out over the trailing 30 days, minus total cash in. Use actual bank transactions, not accrual numbers. Cash basis tells you reality.
What good looks like: Stable or declining net burn relative to revenue. If you're doing $300K/month in revenue and burning $280K, your net burn is $20K/month. That's manageable. If burn is $350K, you have a problem regardless of what the P&L says.
Red flags: Net burn increasing for three consecutive months. Gross burn growing faster than revenue. Any month where net burn exceeds 10% of your cash position.
3. Accounts Receivable Aging
What it is: How much money your customers owe you and how long it's been outstanding. Broken into buckets: current (0–30 days), 31–60, 61–90, and 90+.
How to calculate it: Pull your AR aging report from QuickBooks or your accounting software. Focus on the percentage of total AR in each aging bucket.
What good looks like: 80%+ of AR in the current bucket. Less than 5% in the 90+ bucket. Days Sales Outstanding (DSO) under 45 days.
Red flags: The 60+ bucket growing as a percentage of total AR. DSO increasing over three consecutive months. Any single customer representing more than 20% of total AR and going past 60 days.
4. Revenue Run Rate
What it is: Your current monthly revenue annualized. If you did $250K last month, your run rate is $3M. It's not a forecast — it's a snapshot of where you'd end up if this month repeated 12 times.
How to calculate it: Trailing 30-day revenue multiplied by 12. Some people use trailing 3-month average times 4 to smooth out lumpy months. Both work. Pick one and be consistent.
What good looks like: Growing quarter over quarter. For a $3M run rate business, you want to see it at $3.2M–$3.5M in three months. If it's flat for two quarters, something is wrong with your growth engine.
Red flags: Run rate declining for two consecutive months. Run rate growing but at a decelerating pace (15% growth dropping to 8% dropping to 3%). A single large client representing more than 25% of run rate.
5. Gross Margin
What it is: Revenue minus the direct cost of delivering your product or service, divided by revenue. Gross margin tells you how much you keep from each dollar of revenue before overhead.
How to calculate it: (Revenue − Cost of Goods Sold) / Revenue × 100. COGS includes direct labor, hosting costs, raw materials — anything directly tied to delivering the product.
What good looks like: Industry-dependent. SaaS: 70–85%. Services: 40–60%. E-commerce: 30–50%. The absolute number matters less than the trend. Stable or improving is good.
Red flags: Gross margin dropping by more than 2 percentage points in a quarter. Gross margin below your industry median. COGS growing faster than revenue for three consecutive months.
6. Operating Expenses Ratio
What it is: Total operating expenses as a percentage of revenue. This tells you how efficiently your business runs. OpEx includes payroll, rent, software, marketing — everything that isn't COGS.
How to calculate it: Total operating expenses / Revenue × 100. Compare month over month and quarter over quarter.
What good looks like: For most SMBs doing $1M–$10M, an OpEx ratio between 60–85% of revenue is normal. Below 60% means you might be under-investing in growth. Above 85% means you're leaving very little room for profit and error.
Red flags: OpEx ratio increasing while revenue is flat. Any single OpEx category growing more than 10% quarter-over-quarter without a clear reason. Payroll exceeding 50% of revenue in a non-services business.
7. Runway (Months of Cash)
What it is: How many months you can operate at current burn rate before running out of cash. This is the metric that tells you how much time you have to fix everything else.
How to calculate it: Current cash position / Monthly net burn rate. If you have $400K and your net burn is $50K/month, you have 8 months of runway.
What good looks like: 12+ months for startups. 6+ months for profitable businesses. Less than 6 months should trigger cost reduction conversations. Less than 3 months is a crisis.
Red flags: Runway declining for three consecutive weeks. Runway below 6 months without a clear path to profitability or funding. Runway calculations that assume revenue growth but don't account for seasonal dips.
The Weekly Review
These seven metrics should take 15–20 minutes to review if your data is organized. The problem is that pulling them together from QuickBooks, your bank, and your AR system usually takes an hour or more. That's why most founders do this monthly, if at all.
Monthly isn't enough. A lot can go wrong in 30 days. Weekly review — even a quick 10-minute scan of a dashboard — catches problems when they're small enough to fix without panic.
