Small Business Metrics
Key financial metrics every small business should track.
Gross Profit Margin
Revenue minus cost of goods sold, divided by revenue. Shows the profitability of your products or services.
Target: 50%+ for services, 30%+ for products
Net Profit Margin
Net income divided by revenue. Shows how much of each dollar in revenue translates to profit.
Target: 10-20% for healthy businesses
Current Ratio
Current assets divided by current liabilities. Measures your ability to pay short-term obligations.
Target: 1.5-3.0
Days Sales Outstanding
Average accounts receivable divided by daily sales. Shows how quickly you collect payments.
Target: Under 45 days
Understanding Your Metrics
How to Calculate
Gross Profit Margin
(Revenue - COGS) / Revenue × 100
Net Profit Margin
Net Income / Revenue × 100
Current Ratio
Current Assets / Current Liabilities
Days Sales Outstanding
Avg. Accounts Receivable / Daily Sales
Why They Matter
Gross Profit Margin
Shows pricing power and production efficiency. Low margin may indicate pricing pressure or high production costs.
Net Profit Margin
Reveals true profitability after all expenses. Essential for sustainable business operations.
Current Ratio
Indicates ability to pay short-term obligations. Below 1.0 may signal cash flow problems.
DSO
Measures collection efficiency. High DSO ties up working capital and may indicate collection issues.
Industry Benchmarks
| Industry | Gross Margin | Net Margin | Current Ratio | DSO |
|---|---|---|---|---|
| Professional Services | 60-80% | 15-25% | 2.0-4.0 | 30-45 days |
| Retail / E-commerce | 25-45% | 5-12% | 1.5-2.5 | 30-60 days |
| Manufacturing | 20-35% | 8-15% | 1.2-2.0 | 45-75 days |
| Technology / SaaS | 70-85% | 10-25% | 1.5-3.0 | 45-90 days |
| Construction | 15-25% | 3-8% | 1.0-1.5 | 60-90 days |
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