Building Margin

106: The 5 Metrics Every Founder Must Know

6 snips
Apr 24, 2025
Founders, are you tracking the right numbers? Discover five crucial financial metrics that can transform your business strategy. Learn about gross profit margins and why understanding them by product line is vital. Explore the importance of operating margins, aiming for that 10% target. Uncover the mysteries of free cash flow and its impact on valuation. Finally, understand return on invested capital to ensure smart investments. With practical tracking tips, you’ll stop guessing and build your business confidently.
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INSIGHT

Quality Over Headline Growth

  • Revenue growth matters only when consistent, repeatable, and profitable rather than spiky one-offs.
  • Track growth by source and quality, not just headline percentages.
ANECDOTE

Started Young, Learned To Read Numbers

  • Steve began his first company at 16 running a landscape design-build firm without knowing how to read financials.
  • His early experience taught him not to stay ignorant about the numbers if you plan to scale.
ADVICE

Segment Gross Margin By Offer

  • Break gross profit margin down by product or service line to find winners and losers.
  • Remove or fix low-margin offers that drain resources to boost overall profitability.
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