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When you’re in your first 500 days of business, it’s completely normal to feel like you’re juggling a thousand moving parts.
Between getting clients, delivering work and trying to keep your admin under control, the “numbers side” can feel daunting or easy to put off.
Here’s the good news: you don’t need to be a financial expert to build strong foundations.
Here are four simple financial metrics we encourage every first-time business owner to track from the very beginning (but it’s never too late to start!).
You don’t need special software or complicated spreadsheets, just be consistent, aware and willing to check in with your numbers regularly. They will help you make informed decisions about the viability and health of your business.
Revenue is the total amount of money your business brings in before deducting any expenses.
For early-stage business owners, revenue is just as much a confidence metric as a financial one.
It helps you understand:
Tracking revenue also helps you spot seasonal trends, which makes future planning and cash flow forecasting easier.
Top tip: Review your revenue monthly. A simple upward trend, even a slow one, is a positive sign that your business is gaining traction and a sign to keep doing what you’re doing!
Expenses include everything required to operate your business – tools, subscriptions, IT equipment, marketing, travel and salaries.
Overspending in the early months is very common, especially for product businesses that need to purchase stock upfront.
Knowing your expenses can:
By understanding where your money is going, you can make informed decisions about what to keep, what to cut and where you may need to invest more strategically.
Top tip: Create categories on a budget tracker (e.g. software, marketing, travel) so you can see trends at a glance via pie charts or other visual depictions.
Cash flow measures the timing of money entering and leaving your business. It’s not about what you earned during a period of time, but what you actually have in the bank, available for use.
You can be profitable on paper (i.e. make lots of sales) and still struggle to pay your bills if cash flow is poor.
Healthy cash flow helps you to:
For first-year businesses, cash flow is often the biggest challenge. However, there are opportunities here to build resilience and confidence early if you understand the basics.
Top tip: Aim to keep enough money in reserves that you could cover an entire month’s expenses in an emergency. As you grow, try to grow this fund to protect what you’ve built.
You can download our free cashflow template here!
Profit margin is the percentage of your revenue (incomings) that you get to keep in the bank after deducing your costs (expenses).
It tells you how efficient and sustainable your business is.
A strong profit margin means:
A weak profit margin signals that something needs adjusting. Usually, you need to increase your price or reduce your packaging costs/expenses.
Top tip: Service-based businesses should aim for a profit margin of 10-50%, depending on your delivery model. Product-based businesses may have a profit margin of at least 10%.
When you understand these four numbers, you know exactly where you stand, you can make informed decisions instead of guessing and you feel more prepared for tax season, investment decisions and future growth.
If you’re looking for external investment, it’s a good idea to become very familiar with your accounts!
We have free budget and cashflow templates available on our website – you can download them via Google Sheets or Excel.
Click below to download:
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