Which Measures Are Worth Tracking, and Which Are Not

Worth tracking

1. Gross margin percentage, monthly.
Revenue less direct costs, as a percentage.
Why: it tells you whether the work is worth doing. It moves for reasons, and businesses fail while busy because it fell and nobody watched.

2. Customer concentration.
Largest customer as a percentage of revenue.
Why: above about 30%, your plan is really theirs. One number, calculated in a minute, and it reframes a lot.

3. Cash conversion days.
Days from finishing work to receiving payment, including how long you take to invoice. Why: it is usually longer than owners think, and a large part of it is on your own side.

4. Committed costs for the next quarter.
What you must spend regardless of revenue.
Why: it tells you how far revenue can fall before you have a problem. The most useful single number in an uncertain quarter.

5. Revenue per customer, distributed.
Not the average. The list.
Why: averages hide everything. The list shows which relationships matter and which consume time for little return.

6. Repeat rate.
Proportion of revenue from customers who bought last year too.
Why: it separates a business with a base from one starting again each year, and it predicts next year better than a pipeline does.

Rarely worth tracking in a small business

Current ratio and quick ratio. Nobody has ever changed a decision in a ten-person business because of these. Look at the 13-week cash forecast instead.

Revenue growth alone. Growth at a bad margin makes things worse. Always pair it with margin.

Utilisation, in a service business. Measures busy, not profitable. A team at 95% utilisation on underpriced work is efficiently losing money.

Anything benchmarked against an industry average. Your business is not the average of an industry, and the comparison rarely produces an action.

The test for adding any measure

What decision does this change, and who makes it?

If you cannot answer both, do not track it. Every measure has a maintenance cost and an attention cost, and attention is the scarcer of the two.

How many to track

Five or six. Not twenty.

Twenty measures means nobody watches any of them closely enough to notice a change.

Where they come from

All six above come from your ledger, provided your banks are reconciled and your chart of accounts separates what you want to see separately.

Every measurement problem in a small business is a bookkeeping problem first.

Where we fit

We produce these six as part of monthly reporting. If you currently track twenty things and act on none, the shorter list is the improvement.