Quick Answer
Finance teams should track KPIs across profitability (gross margin, EBITDA margin, net profit margin), liquidity (cash runway, operating cash flow, debtor days), growth (revenue growth rate, ARR for SaaS), and efficiency (OpEx as percentage of revenue, CAC payback, revenue per employee). Choose 10-15 metrics aligned to your business model and strategic priorities.
Tracking too many metrics creates noise; tracking too few leaves blind spots. The right KPI set gives leadership a balanced view of financial health and operational performance, enabling faster and better decisions.
Profitability metrics: - Gross margin — revenue minus cost of sales, as a percentage. Shows pricing power and production efficiency. - EBITDA margin — earnings before interest, tax, depreciation, and amortisation as a percentage of revenue. A proxy for operating cash generation. - Net profit margin — bottom-line profit as a percentage of revenue, after all costs including tax.
Liquidity metrics: - Cash runway — months of cash remaining at current burn rate. Critical for pre-profit businesses. - Operating cash flow — cash generated from core operations, excluding financing and investing activities. - Debtor days — average number of days to collect receivables. In the UK, the average for SMEs is around 55 days.
Growth metrics: - Revenue growth rate — year-on-year or quarter-on-quarter percentage change. - Customer acquisition cost (CAC) — total sales and marketing spend divided by new customers acquired. - Revenue per employee — shows operational leverage as the business scales.
SaaS businesses should also track: - Annual recurring revenue (ARR) — the annualised value of recurring subscriptions. - Net revenue retention (NRR) — measures expansion minus churn within existing customers. Above 110% is strong. - Burn multiple — net burn divided by net new ARR. Below 2x is efficient. - LTV:CAC ratio — customer lifetime value divided by acquisition cost. Target 3:1 or higher. - Months to recover CAC — how quickly you recoup customer acquisition spend.
1. Align to strategy. If your priority is growth, weight growth and efficiency metrics. If you are optimising for profitability, emphasise margin and cash flow KPIs.
2. Set targets. Every KPI needs a target or benchmark. Use industry data, peer comparisons, or historical trends.
3. Review cadence. Track KPIs monthly in management reports and quarterly in board packs. Some operational KPIs (like cash position) may warrant weekly review.
4. Automate collection. Pull data directly from your accounting system and CRM into your FP&A platform. Manual KPI compilation is slow and error-prone.
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FAQ
Aim for 10-15 at the company level. Each department can track additional operational metrics, but the executive dashboard should be focused enough to review in under five minutes.
Yes. As your business matures, your KPI set should evolve. An early-stage startup focuses on growth and runway; a mature business shifts toward profitability and efficiency. Review your KPI framework annually.
For UK businesses, sources include the Annual Business Survey from the ONS, sector reports from trade bodies, and for SaaS, benchmarks from OpenView, Bessemer, and SaaS Capital. Your auditors or advisors may also provide peer comparisons.
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