Most business owners know their revenue.
But ask them this:
- How long could your business survive without new revenue?
- What’s your margin after delivering your work?
- What percentage do you truly keep?
That’s where the pause happens. Because revenue feels like progress. But these three numbers? They tell you if your business is actually working.
Revenue is as exciting as it incomplete. Growing revenue does not guarantee that the business doesn’t run out of cash and that the take home money isn’t less than it was last month.
That’s why smart business owners don’t just track growth— they track what sticks.
Cash Runway: “How Long Can You Last?”
Cash runway tells you how many months your business can operate if revenue slows down—or stops. It’s your buffer, your leverage, your ability to make decisions without pressure.
Quick calculation:
Cash on hand ÷ Monthly expenses = Runway (in months)
Example:
$60,000 cash
$20,000 monthly expenses
= 3 months of runway
The recommended buffer for most business models is between six and 12 months to help bridge unexpected obstacles and give you flexibility to course correct should it become necessary.
Gross Margin: “Are You Making Money on the Work?”
Gross margin shows what’s left after delivering your product or service.
Not after everything—just the direct costs.
Formula:
(Revenue – Cost of Goods Sold) ÷ Revenue
This is where a lot of businesses get surprised. Because you can be busy, fully booked, and still underpriced.
Watch for:
- Margins shrinking as you grow
- Costs creeping up quietly
- Services that take more time than they’re worth
If your margin is thin, more sales won’t fix it, they’ll just scale the problem. Pricing can be one of the more difficult aspects of running a business and this calculation will point you in the right direction.
Net Profit %: “What Do You Actually Keep?”
This is the number that matters most.
Net profit percentage shows what’s left after everything:
- Expenses
- Overhead
- Taxes
- Operations
Formula:
Net Profit ÷ Revenue
Example:
$500,000 revenue
$50,000 profit
= 10% net profit
That means for every $1 you earn, you keep $0.10. For many business owners, that number is lower than expected.
The Pattern Most Businesses Fall Into
Here’s how it usually plays out:
Revenue increases.
Expenses quietly follow.
Margins tighten.
Cash gets squeezed.
But because revenue looks strong, nothing gets addressed until it has to be.
What Changes When You Track These Monthly
You stop guessing.
You start seeing:
- Where money is leaking
- When to raise prices
- When to cut costs
- How much risk you are actually carrying
And more importantly, you have the right conversations with your advisor before small issues turn into expensive ones. Instead of reacting late, you adjust early.
Please reach out to the Leesburg or Warrenton office if you have questions regarding these calculations or would like us to help with your business needs.