The Numbers Every Owner Should Watch

Part B: Understand the Money

Say you run an HVAC company, you are scaling up your Google Ads, and you wonder whether it is worth it. The cost per click matters less than the cost per lead, and what matters most is whether you are tracking the conversions. Once your cost per lead creeps up and the leads get less serious, your cost per customer climbs faster. Clicks are what you pay for. Customers are what you are actually after.

That question is the heart of this lesson. Owners drown in numbers they can see and starve for the few that matter, the ones often called key performance indicators, or KPIs. Here are six worth putting in front of you every month, with nothing more complicated than a calculator. The Simple Business Dashboard covers four inputs (ad spend, leads, customers and cash) and the four numbers they give you: cost per lead, close rate, cost per customer and weeks of cash. Gross margin and receivables go on the Monthly P&L Tracker.

Three numbers from your marketing

Cost per lead is what you spent on marketing divided by the leads you got. Say you spend $1,500 in a month and get 30 calls and forms. That is $50 per lead. The number only means something if you count leads honestly, which is where a simple tracking system comes in. I explain why later, in Why You Need a CRM Before You Spend on Ads.

Close rate is the share of leads who become paying customers. If 6 of those 30 leads hire you, that is 6 out of 30, or one in five. Cost per customer is your marketing spend divided by customers won: $1,500 divided by 6 is $250. Customer acquisition cost, or CAC, is the fuller version that also counts your sales costs and your time, which we covered in Unit Economics.

See how they connect. Now say cost per lead drifts up to $75, so the same $1,500 buys 20 leads, and those leads are a lot less serious, so only 2 close, half the rate before. That is $750 per customer. Cost per lead rose by half, and cost per customer tripled. Cost per customer climbs faster than cost per lead when the close rate drops with it. If the close rate had held at one in five, the two would have risen together. The free CPL vs CAC workbook on the Resources page lets you plug in your own figures and watch this happen.

Three numbers from the money side

Cash on hand, in weeks, which I also call weeks of cash. Take the cash in your accounts and divide it by your average weekly spending on payroll, materials, rent and everything else. Say you have $30,000 and spend about $5,000 a week. That is six weeks. This is far more useful than the raw balance, because it tells you how long you could keep going if the phone stopped ringing. I write about building that cushion in Building a Cash Reserve.

Gross margin is what is left of a job after its direct costs, shown as a percent of the price. Say a job is $10,000 and the materials and labor on it cost $6,000. You kept $4,000, so the gross margin is 40 percent. Watch whether it holds steady, because a slipping margin means your prices or your costs are moving against you.

Receivables owed is the total of what customers have been billed and not yet paid. Track the total and how old the oldest invoices are. Money owed to you is a loan you made without meaning to, and it comes out of the same pocket as payroll.

A quick check on all six together is worth doing. Leads coming in but customers not following points at your sales process. Customers coming in but cash staying thin points at margin or slow collection. The numbers work as a set, and the pattern between them is usually where the answer sits.

Notice what I left out. I am not giving you a “good” cost per lead or a “normal” margin, because those depend on your trade, your market and your prices. Your benchmark is your own number last month. Are you moving in the right direction, and do you know why?

Write the six numbers on one sheet of paper, or put ad spend, leads, customers and cash on your Simple Business Dashboard and gross margin and receivables on the Monthly P&L Tracker. Fill in this month’s figures, even roughly. Where you cannot find one, such as how many leads you got, that is the finding, and it is the number to start tracking tomorrow.

Setting up the sheet takes 30 to 60 minutes the first time, mostly finding the marketing spend and lead counts. After that, about 15 minutes a month, and it fits inside the routine in The Monthly Financial Review. It is free unless you decide to buy tracking software later, which is your call.