Most SMEs make decisions looking at the bank balance. The problem is that the cash you have today does not tell you whether the business is profitable, whether you will make payroll next month, or whether you are growing in a healthy way.
You do not need an expensive system or a finance team to start. With these seven indicators, a tidy spreadsheet and the discipline of reviewing them every month, you already have the real pulse of your company. Let us go one by one.
The 7 indicators
1. Gross margin
(Sales minus Cost of sales) / Sales. It measures how much your product or service leaves before overhead. It is the foundation of all profitability: if gross margin falls short, no expense cut will save it. Track its trend month over month; a sustained drop usually signals pricing, cost or product-mix problems.
2. EBITDA margin
EBITDA / Sales. EBITDA is operating profit before interest, taxes, depreciation and amortization. It shows the pure profitability of the business, comparable across periods and against your sector. If gross margin rises but EBITDA does not, the issue is in fixed costs.
3. Operating cash flow and runway
Cash the operation generates; months of cash available. Accounting profit does not pay salaries; cash does. Runway tells you how much time you have before running out of oxygen. Project at least 13 weeks of cash and, if it drops below 6 months, raise the alarm early.
4. Cash conversion cycle
Inventory days plus receivable days minus payable days. It measures how long each unit of money takes to come back as cash. A long cycle chokes working capital even with strong sales. Aim to shorten it: collect sooner, negotiate reasonable payment terms and avoid overstock.
5. Break-even point
Fixed costs / Contribution margin (%). It is the sales level where you neither gain nor lose. Knowing your sales floor sets prices, costs and commercial targets: it is the compass of any plan. If you are near break-even, use data to decide whether to raise margin, cut costs or push volume.
6. Revenue growth
Percentage change in sales, period over period. Healthy growth sustains company value; growth without margin or cash sinks it. Never look at it alone: always analyze it together with margin and cash generation.
7. Liquidity and working capital
Current assets / Current liabilities. It measures your ability to cover short-term obligations without choking. A current ratio below 1 is usually a sign of tension. Watch the trend, not just the point value.
Where to start
You do not need to implement all seven at once. Start with the three that hurt most today (usually margin, cash and growth) and add the rest as you organize your data. What matters is not the tool, but the discipline of reviewing them every month and turning each number into a decision.
Want these KPIs running on an up-to-date dashboard?
At ADN we implement them connected to your data, with a clear read for every decision.
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