KPIs: How to Quickly Tell If Your Business Is Healthy

Imagine if the only time you checked your health was at your annual physical.

That’s what a lot of business owners do with their finances—they wait until:

• The books are closed

• The year is over

• Or the tax return is filed

By then, it’s too late to change what already happened.

Key Performance Indicators (KPIs) are how you check your business’s pulse now, so you can adjust while it still matters.

What is a KPI?

A Key Performance Indicator (KPI) is:

A specific, measurable number that shows how well a part of your business is performing.

Not every metric is a KPI. The “K” matters: Key.

• “Number of likes on a random post” → not key

• “Average revenue per client” → key

• “Total hours you worked” → interesting

• “Billable hours vs. non-billable hours” → key

A good KPI:

• Is tied to something important (profit, growth, efficiency, client experience)

• Is clearly defined (everyone knows how it’s calculated)

• Can be measured consistently

• Helps you make a real decision

If a number doesn’t help you decide something—hire, cut, invest, change—it’s probably not a KPI.

Why KPIs matter so much for your business

1. Faster, better decisions

With the right KPIs, you can:

• Glance at a simple dashboard

• See what’s off track

• Decide what to fix this week, not next year

You don’t have to dig through reports or wait for your accountant. The numbers you care about are already front and center.

2. Early warning system

KPIs help you see trends before they turn into emergencies.

• Sales pipeline slowing down

• Profit margins shrinking

• Client churn creeping up

• Cash runway shrinking

Instead of “How did we lose money this year?”, you’re asking,
“What’s slipping right now, and how do we fix it?”

3. Clear focus for your team

KPIs give everyone the same scoreboard:

• If growth is the priority → track revenue, new clients, and lead conversion rate.

• If stability is the priority → track cash balance, profit margin, and AR days.

Your team knows what “winning” looks like this quarter.

4. You don’t have to wait for the books to close

This is big.

With good KPIs, you’re no longer flying blind until:

• The month closes

• The quarter ends

• Or your tax return comes back

You can tell if things are healthy in the middle of the month, from a simple snapshot.

Examples of helpful KPIs (and how they guide decisions)

Here are some practical KPIs you might track as a small business.
You don’t need all of these—just a few that fit your situation.

1. Revenue & sales KPIs

Monthly Revenue

• What it tells you: How much money is coming in from sales.

• Why it’s useful: Shows growth trends and seasonality; lets you compare this month vs last month vs last year.

• Decision help: Do we need more leads, better pricing, or a new offer?

New Clients / Customers per Month

• What it tells you: How many new people you’re adding to your base.

• Decision help: Is marketing/sales working? Do we have a steady stream of new business?

Lead-to-Customer Conversion Rate

• What it tells you: Out of all the leads you get, what % turns into paying clients.

• Decision help: If this is low, the problem may be your sales process or offers—not just “we need more leads.”

2. Profitability KPIs

Gross Profit Margin (%)

• Formula: (Revenue – Direct Costs) ÷ Revenue

• What it tells you: How profitable your core work is before overhead.

• Decision help: If this is too low, you might need to raise prices, tighten scope, or reduce direct costs.

Net Profit Margin (%)

• Formula: Net Profit ÷ Revenue

• What it tells you: How much of every dollar of revenue you actually keep after all expenses.

• Decision help: Is the business truly profitable, or just busy?

These help you answer, quickly:

“Are we making money in a healthy way, or just spinning our wheels?”

3. Cash & collections KPIs

Cash Balance / Cash on Hand

• What it tells you: How much money you actually have in the bank.

• Decision help: Can you cover the next 1–2 months of expenses? Can you afford that new hire or big purchase?

Accounts Receivable Days (AR Days)

• Rough idea: How long it takes, on average, to get paid.

• What it tells you: If clients are slow to pay, cash might be tight even when sales look good.

• Decision help: Do we need clearer payment terms, deposits, or better follow-up on invoices?

Cash Runway

• What it tells you: At your current spending level, how many months can you operate with your existing cash if no new money came in.

• Decision help: Are we in a safe zone, or do we need to cut costs or increase revenue fast?

4. Operations & efficiency KPIs

On-Time Delivery Rate (for services or products)

• What it tells you: The % of projects/orders delivered on time.

• Decision help: Do we need better processes, more staff, or better scoping?

Utilization Rate (for service businesses with teams)

• What it tells you: How much of your team’s time is spent on billable or core work vs. admin.

• Decision help: Are we overstaffed, understaffed, or using people on the wrong things?

Average Revenue per Client

• What it tells you: How much, on average, each client brings in over a time period.

• Decision help: Focus on higher-value clients? Offer add-ons or retainers? Stop chasing low-value work?

5. Client & retention KPIs

Client Retention Rate

• What it tells you: How many clients stay with you over a period.

• Decision help: If retention is low, you may need better onboarding, communication, or service quality.

Churn Rate (for recurring or subscription businesses)

• What it tells you: What % of clients cancel each month or quarter.

• Decision help: High churn can kill growth; you may need better fit clients or stronger value delivery.

How KPIs help you make decisions quickly (instead of searching for answers later)

Picture two business owners:

Owner A

• Only looks at numbers when the accountant sends year-end reports

• Finds out profit dropped months after it started happening

• Feels like everything is a surprise

Owner B

• Has a simple KPI dashboard they look at every week or month

• Spots that:

  • Gross margin is dropping

  • AR days are increasing

  • Lead conversion is slipping

• Adjusts pricing, tightens scope, and improves collections in real time

Same level of effort in the business.
Very different level of control.

KPIs mean:

• You don’t have to dig through the P&L every time you want insight

• You’re not waiting until “the books are closed”

• You’re not discovering problems only when tax returns are prepared

You get a quick, clear read on business health now, not six months from now.

How to start using KPIs in your business (without overcomplicating it)

You don’t need a 30-metric dashboard. Start simple:

Step 1: Choose 3–7 KPIs

For most small businesses, a good starter set is:

• Monthly Revenue

• Gross Profit Margin

• Net Profit Margin

• Cash Balance (and/or Cash Runway)

• AR Days (if you invoice clients)

• 1–2 KPIs tied to your model:

  • New Clients per Month

  • Lead-to-Customer Conversion Rate

  • On-Time Delivery Rate

Step 2: Define them clearly

Write down:

• What each KPI means

• How it’s calculated

• How often you’ll measure it (weekly, monthly, quarterly)

• Who’s responsible for updating it

Clarity prevents “metric drift” where everyone thinks the number means something different.

Step 3: Put them in a simple dashboard

This can be:

• A spreadsheet

• A page in your accounting/reporting tool

• A simple one-page summary your bookkeeper provides monthly

The key: all your key numbers in one place.

Step 4: Create a review rhythm

Once a month (or biweekly):

• Look at each KPI

• Compare to last month and to your target

• Ask:

  • What’s improving?

  • What’s slipping?

  • What action do we take?

Write down 1–3 actions, not 20.
Your KPIs should drive focus, not overwhelm you.

When to get help with KPIs

You might want support if:

• You’re not sure which KPIs matter most for your business model

• Your reports exist, but they feel like a wall of numbers

• You’re growing, hiring, or investing and want to make sure the numbers support your plans

• You want a simple dashboard you can scan in 5 minutes and actually trust

This is where an outside partner can save you hours of guessing and trial-and-error.

CTA: Let The Financial Smith help you build a KPI dashboard that actually drives decisions 🔨

At The Financial Smith, we help business owners move from “I know I should track KPIs…” to:

• A short, focused list of the right KPIs for your business

• Clear definitions and targets for each one

• A simple KPI dashboard (no jargon, no fluff)

• A review rhythm that helps you make better decisions faster—without waiting for year-end or tax season

If you want to quickly see how healthy your business is—without digging through reports every time:

👉 Reach out to The Financial Smith to set up a KPI and dashboard review.
We’ll help you pick the metrics that matter, set them up in a way you can understand, and use them to guide your next big decisions with confidence.