Original post here.
Keeping a business healthy sometimes means dealing with the things we'd rather avoid… and yes, that occasionally includes math. No, you don't need to know hundreds of formulas, just the basics that help you understand what's going on.
Here are 5 of the most practical ones we see business owners use all the time - they're simple, straightforward, and honestly pretty eye-opening once you start applying them.
Runway
How long can your business sustain itself?
Runway tells you how many months your business can operate before cash runs out - crucial for business owners planning growth or funding rounds.
Runway = Current Cash ÷ Monthly Burn Rate
If you have $120,000 in the bank and spend $20,000/month, you have 6 months of runway.
Tip:
If your runway is under 6 months, it’s time to either reduce expenses or increase revenue velocity.
We often use cash flow forecasting tools like Fathom, Syft Analytics, and Spreadsheets to visualize this clearly.
Gross Margin
How much you really make after costs?
Revenue means nothing if your costs eat it up. Gross margin shows how efficiently you turn sales into profit.
Gross Margin = (Revenue - Cost of Goods Sold) ÷ Revenue × 100
If you earned $200,000 and your cost of goods sold was $120,000, your gross margin is 40%.
Tip:
Compare this against industry benchmarks: SaaS companies often target 70-80%, e-commerce brands may see 40-60%. Regular variance analysis helps pinpoint if costs are creeping up or pricing needs adjustment.
ROAS
Are your ads paying off?
Every dollar you spend on ads should bring more than a dollar back. ROAS (or Return on Ad Spend) tells you if your marketing is working.
ROAS = Revenue from Ads ÷ Cost of Ads
If you spend $10,000 on ads and earn $40,000 in sales, your ROAS is 4x. That means you earn $4 for every $1 spent.
Tip:
Track ROAS by campaign, not overall. A 4x ROAS on one channel may hide losses elsewhere. The goal is sustainable ROAS that aligns with your margin and lifetime value.
Breakeven Point
When your business starts making profit
Knowing when you’ll cover all your fixed and variable costs helps you make smarter pricing and scaling decisions.
Breakeven Point = Fixed Costs ÷ (Selling Price per Unit – Variable Cost per Unit)
If your fixed costs are $50,000, selling price is $100, and variable cost is $60, you need to sell 1,250units to break even.
Tip:
Use it to forecast sales targets or evaluate the impact of discounts and promotions.
NPS
How loyal are your customers?
NPS (Net Promoter Score) measures customer satisfaction and loyalty, and it’s one of the most powerful indicators of future growth.
NPS = % Promoters (9–10) – % Detractors (0–6)
If 60% are Promoters and 10% are Detractors, your NPS is 50.
Tip:
An NPS above 50 is strong. Don’t just track it, act on feedback. Many of our clients use it internally too, measuring satisfaction across both clients and teams.
Bringing it all together
These formulas are decision tools that reveal where your business stands, and where it’s headed.
- Runway - how long you can last
- Gross Margin - how efficiently you earn
- ROAS - how effectively you spend
- Breakeven - when profit begins
- NPS - how loyal your customers are
