Financial Metrics Every Business Owner Should Know

Most entrepreneurs lose credibility fast—because they don’t know their numbers. In this video, I’ll walk you through the essential financial metrics every business owner should understand to lead with confidence and make smarter decisions.

Whether you're pitching investors, managing cash flow, or just trying to run a tighter operation, these metrics will help you sound like a pro and steer your business in the right direction.

Watch now—before you blow your next big opportunity.

TRANSCRIPT:

Picture this, you have a business idea and it's a really good one and you wanna make it a reality. So you go to an investor to pitch your idea, but there's a major problem. Immediately, they start diving into the unit economics of your business.

You scratch your head, you're like, what the heck are unit economics? They ask you, okay, what's your average revenue per customer? How many customers do you need to break even? What's your LTGP to CAC ratio, which stands for lifetime gross profit to customer acquisition costs? Or they ask you about your net revenue retention rate or your burn rate or your cashflow compared to EBITDA. You don't even know what EBITDA is. They start asking you all these questions and then you realize you are stuck and you just blew your opportunity.

This happens all the time. Just the other day, I was talking to one of my friends and he is telling me about this idea that he has for a SaaS business, a software business. And I love the idea, but then I started asking him about his unit economics and he just had a blank stare on his face.

And he's like, I know, I need to figure that out. I need to refine that. And it's like, dude, you need to figure out the unit economics of your business to see if the operating model even works.

Now, you don't need to go down this path imagining all the different scenarios and all the things that could go wrong with your company, but you do have to understand, can you generate a profit based on your operating model? So I like to start with lifetime gross profit per customer compared to your customer acquisition costs, especially if you're new because you're gonna have to go out there and acquire new customers. And you're gonna have to figure out what's it gonna cost to acquire a new customer. And based on the pricing that you're gonna charge, what is the gross profit of that customer over their lifetime with you, right? And when you compare that ratio, let's just say you look at that first, it needs to be at least three to one.

And if you wanna really scale your business, it should be like 10 to one because over time that ratio is going to compress as you scale and as you hire people for business development and sales roles, like ultimately it's gonna go down. So you wanna start off with a bigger number knowing that it's gonna compress over time. But that's just one example.

Like I said, understanding your breakeven point, your burn rates, how much cashflow you need, what's your return on invested capital or your economic profit, all these things you have to know. And that's why financial literacy is so critical. Sometimes people are like, finance is for the birds, accounting is for the nerds, right? But if you wanna be successful in business, let's just say you have a business idea and you wanna make it a reality.

If you don't understand the fundamentals of finance, you're gonna struggle to be successful. I'm not talking about being a nerd. I never have.

I've never promoted the idea of being a nerd, wearing a green shade in the back office, doing debits and credits until the trial balance ticks and ties. That's the opposite of what I preach. Instead, I'm talking about the fundamentals of finance.

Do you know how to read an income statement, a balance sheet, a statement of cash flows? Do you know the four levers of profitability? Do you know the unit economics of your business? Do you know the, let's say five to 10 metrics that you should be paying attention to to determine whether or not your company has a good strategy and whether or not you are generating value? So these are all the things that you need to know. And because I'm so passionate about this topic, you can tell I created this passion project called Boosting Your Financial IQ, right? And on the podcast and through my website and through videos, I educate people in the area of financial literacy. And the reason why I do this is because financial literacy or a lack thereof is the number one obstacle that holds individuals back in business.

And in fact, it's the number one obstacle that hurts companies and causes companies to fail. So I don't want you to go down this path. So over the holiday break between 2024 and 2025, I had this revelation and I'm like, my whole mission is to educate people.

So there are people across the world that don't have access to really good education, right? They're gatekeepers of knowledge. There are people that charge a lot of money for courses. I used to charge for my courses.

There are universities that are super expensive and all they do is teach academic stuff and it takes four years or five years or six years to teach people in order for them to get a bachelor's degree or a master's degree. So like there's gotta be a better way. And that's when I created the Financial Pro Program.

There are over a hundred lessons. It's my best stuff. It's not some marketing ploy to give you just my cheap, free stuff that's incomplete.

Instead, it's good stuff. It's my best stuff. There are six levels.

You can become a financial pro and guess what? It's all free. It's all free, all right? No gimmicks, just knowledge. So there's no excuse.

So if you want to be successful in business, if you want to kickstart a new venture, you have to know your numbers. Even if you're not raising capital and going to an investor, you have to understand the numbers behind your business. That's the story behind your business.

That's gonna be your report card. That's gonna tell you whether or not you have the economic capacity to even run your business and make it successful. All right, that's what I wanted to share with you.

Until next time, take care of yourself. Cheers.