In this guide
Know your margins — both of them
Gross margin says whether the product works; net margin says whether the company does (see the comparison). Track both monthly with the gross margin and profit margin calculators; falling gross margin is an early-warning siren.
Break-even: the most clarifying number in business
Fixed costs ÷ contribution margin = the volume where you stop losing money (break-even point). It converts every decision — hire, rent, price change — into “how many more units is that?” Run yours here, and re-run it whenever fixed costs move.
Cash flow beats profit in the short run
Profitable companies die waiting to get paid (cash flow vs profit). Watch the cash conversion cycle — days your cash is stuck in inventory and receivables — and keep working capital positive. If you run at a loss deliberately, know your runway to the day (calculator).
Pricing: margin, not markup
A 50% markup is a 33% margin — confusing them under-prices everything (markup vs margin). Price from target margin with the pricing calculator, and remember a price increase drops straight to profit: at 20% net margin, +5% price ≈ +25% profit if volume holds.
Employees cost more than their salary
Payroll taxes (7.65% employer FICA), benefits, equipment, and space put true cost at 1.2–1.4× salary — the employee cost calculator totals it. Price that into every hire and into every quote your labor goes into.
Debt: borrow against math, not hope
Lenders want to see the loan servicing itself. Before applying, run the business loan calculator and check payments against realistic cash flow. SBA loans (calculator) trade paperwork for longer terms and smaller down payments than conventional loans.
Subscription businesses: four numbers rule everything
MRR, churn, CAC, and LTV. Healthy means LTV:CAC of 3:1+ and churn low enough that growth compounds (ratio calculator). Halving churn doubles LTV without touching price — retention is the cheapest growth there is.
What is it worth?
Small businesses trade on multiples of EBITDA or seller’s discretionary earnings — commonly 2–4× for main-street firms (why multiples vary). Owner-independence, clean books, and recurring revenue raise the multiple. Get a first estimate with the valuation calculator.
Reviewed July 2026 · Formulas and 2025 tax figures per the methodology page. Educational content, not financial advice.