Business Numbers
The numbers behind a small business, what each one tells you, and how to work it out from your own books. 25 articles.
Working Capital: Why a Profitable Business Runs Out of Cash, and How to Free It
What working capital is, the formula, why profitable small businesses run short as they grow, and four ways to free cash, worked through an example.
Quick Ratio: What Really Counts as a Quick Asset (With a Worked Example)
The quick ratio formula, which assets count as quick line by line, how it differs from the current ratio, and what to do when it falls, with an example.
Current Ratio: What's Good for Your Business, and When High Is a Warning
The current ratio formula with a worked example, what a good current ratio looks like for different businesses, and why a rising one can be a warning sign.
Cash Conversion Cycle: A Worked Example and How to Shorten It
How to calculate the cash conversion cycle (DIO + DSO − DPO) from small business books, what each day is worth in cash, and the changes that shorten it.
How to Calculate Gross Margin: Overall, per Product and in a Spreadsheet
How to calculate gross margin step by step, overall and per product, with spreadsheet formulas, what belongs in COGS and why your till and books disagree.
Operating Margin: What It Shows That Gross Margin Hides, and How to Raise It
Operating margin explained with a small-business example: the formula, why it can fall while sales grow, the owner's pay adjustment and fixes that move it.
Contribution Margin: Per Unit, Total and Ratio, and Which Products to Push
Contribution margin per unit, in total and as a ratio, with a worked product table, rules for which products to push, fix or drop, and break-even in one step.
Margin vs Markup: The Difference, a Conversion Table and the Pricing Mistakes It Causes
Margin vs markup explained with one picture, a conversion table, spreadsheet formulas and five pricing mistakes the mix-up causes, each priced out in dollars.
What Is EBITDA? A Small-Business Guide With a Worked Example
What EBITDA is, how to calculate it from your P&L, why lenders and buyers use it, how it differs from SDE and cash flow, with a worked small-business example.
EBITDA Margin: How to Calculate It, Compare It and Find What Moved It
How to calculate EBITDA margin, find which cost moved it, compare it fairly, and when adjusted EBITDA is fair, with a worked physiotherapy clinic example.
Burn Rate: Gross vs Net, Runway, and What to Cut First
How to calculate gross and net burn rate from your bank balance, turn it into runway, test whether you're default alive, and decide what to cut first.
Run Rate: How to Calculate It, When It Misleads, and Run Rate vs ARR
How to calculate a revenue run rate, why one-off deals and seasonality distort it, and when to use ARR or trailing twelve months, with a worked example.
Profit and Loss Statement: How to Read One, Line by Line
How to read a profit and loss statement line by line, with a florist's year as the example: monthly vs annual views, five key ratios and the common mistakes.
Profit and Loss Statement Template: 12 Months with % of Revenue (Free .xlsx)
A free profit and loss statement template: 12 monthly columns, year totals, each line as a % of revenue and built-in checks, with a filled-in example.
Balance Sheet Template: Two Dates, a Check Cell and Key Ratios (Free .xlsx)
A free balance sheet template that compares two dates and checks itself: a $0 check cell, a retained earnings test, key ratios and a worked example.
Balance Sheet vs Income Statement: One Bookshop, Shown Both Ways
Balance sheet vs income statement, explained with one bookshop's books: what each shows, how retained earnings link them, and why profit isn't cash.
The Cost of Goods Sold Formula, Worked Through One Year at a Small Maker
The cost of goods sold formula with a worked example from a small hot sauce maker: what goes in, what stays out, how to count inventory, and the IRS rules.
Cash vs Accrual Accounting: One Month at a Carpentry Shop, Done Both Ways
Cash vs accrual accounting shown with one month of a carpentry shop's books: why a $5,200 profit became an $8,000 loss, which to use, and what the IRS says.
How to Calculate Revenue: Gross, Net and Earned, With One Studio's Month
How to calculate revenue step by step with a pilates studio's month: gross vs net, what isn't revenue, when prepaid packs count, and revenue by stream.
Revenue per Employee: How to Count It So It Means Something
Revenue per employee for a small firm: the formula, counting FTEs, why pass-through revenue misleads, how to compare with care, and what to do when it moves.
Pareto Analysis: Find the Few Causes Behind Most of Your Problems
How to do a Pareto analysis in a spreadsheet: rank causes, add a cumulative %, chart it, and weight by cost. Worked on a bike shop's comebacks and customers.
Cohort Analysis: Build a Retention Table From Your Order Export
A step-by-step cohort analysis from a plain order export: formulas, a pivot, a retention table, and how to read rows, columns and diagonals to spot churn.
Conversion Rate Formula: Four Versions and Which One to Use
The conversion rate formula in four versions (sessions, users, orders, leads), worked on one month of real-looking numbers, and the traps that skew it.
How to Create a Sales Forecast From Your Own Sales History
How to create a sales forecast in seven steps: a seasonal index from your history, price and volume drivers, a bottom-up check and monthly variance rules.
Billable Hours: Targets, Utilization, Realization and Collection
How billable hours work at a small law firm: what a target asks for, utilization vs realization vs collection, tracking time ethically, and fixing leaks.