You don’t need to be a finance geek to track your startup’s health. But you do need to know your numbers — because metrics drive money.
In this edition, I’ll simplify the most important financial ratios every founder should monitor — to raise smart, spend better, and scale sustainably.
1. Burn Rate
How much money are you spending per month?
Formula: Monthly Cash Outflow
Why it matters: 📉 Shows how fast you’re using cash 🧭 Helps calculate your runway
2. Runway
How long before your startup runs out of cash?
Formula: Cash in Bank ÷ Burn Rate
Why it matters: 🕒 Tells you how much time you have to raise funds or reach breakeven 🔍 Investors always ask for this
3. Gross Margin (%)
What’s left after covering direct costs?
Formula: (Revenue – COGS) ÷ Revenue × 100
Why it matters: 📊 Shows profitability at a product level ✅ High gross margins = scalable business
4. CAC (Customer Acquisition Cost)
How much do you spend to acquire one paying customer?
Formula: Marketing + Sales Cost ÷ Number of New Customers
Why it matters: 💸 Helps optimize ad spends and sales efforts 📉 High CAC = unsustainable growth
5. LTV (Customer Lifetime Value)
How much revenue do you expect from one customer over time?
Formula: Average Value per Purchase × Purchase Frequency × Retention Period
Why it matters: 💰 High LTV with low CAC = healthy business
6. LTV : CAC Ratio
How much value you get for every rupee spent on acquiring a customer
Ideal Benchmark: 3:1 or higher
Why it matters: 💡 Tells investors if your growth engine is efficient
7. Contribution Margin
Profit per unit after all variable costs
Formula: Selling Price – Variable Costs
Why it matters: 📦 Useful for product-level decisions 📈 Important for unit economics in pitch decks
🎯 Final Thought
Don’t wait for an investor to ask. If you can’t explain these numbers, you might not understand your business deeply enough.
As a Chartered Accountant and Virtual CFO, I help founders track the right metrics — without turning them into Excel zombies.
📩 Want me to review your current numbers or help build a model, feel free to reach out at 📧 office@cfoemeritus.com
