Financial Health Check: The Key Metrics Every CEO Should Monitor

As CEOs, we often get wrapped up in chasing the next big opportunity—expanding into new markets, launching new products, or driving revenue growth. But after 17 years as an entrepreneur, I’ve learned that none of those efforts matter if you don’t have a clear handle on your financial health. I’ve been there. I’ve had to shut down businesses that had been running for years and spin off others, not because of a lack of potential, but because I was losing money in places I wasn’t looking. Once I dialed into the right numbers and made the right pivots, it changed my business entirely. Several ventures that were resource drains became profit centers just by gaining clarity on these key financial metrics.

Here are five critical financial metrics you need to track to stay in control of your company’s health. And here’s the key: you need to track them over time—a snapshot won’t do. The trends reveal the real story.

1. Gross Margin %

Gross margin percentage shows you how much profit you’re making after accounting for the cost of producing your goods or services. It’s a clear indicator of whether your pricing, production, and overall efficiency are working for or against you. If your gross margin is low, it’s a sign that something is off in your business model.

Actionable Insight: Keep a close eye on this figure. If it starts to drop, investigate whether your costs are creeping up or if you need to reevaluate pricing.

2. Direct Labor %

Direct labor percentage tells you how much of your revenue is going toward paying your employees directly involved in production. This is crucial because labor costs are often one of the biggest expenses a company has. Too high a percentage can eat into your margins, too low can signal inefficiencies or underinvestment in your workforce.

Actionable Insight: If this number is out of balance, look at optimizing processes or even renegotiating supplier or vendor contracts to manage costs.

3. Overhead %

Your overhead percentage tracks how much of your revenue is going toward keeping the lights on—things like rent, utilities, and administrative salaries. Keeping overhead low relative to revenue is key to maintaining profitability, but cutting too much can lead to operational bottlenecks.

Actionable Insight: If overhead is climbing, look for ways to reduce non-essential expenses or streamline operations without sacrificing quality.

4. Profit Ratio %

Your profit ratio tells you how much of every dollar earned translates into profit after all expenses are paid. This is your ultimate indicator of business health. A healthy profit ratio means you’ve got a strong handle on both revenue generation and cost control.

Actionable Insight: If your profit ratio starts slipping, it’s a signal to review both your pricing strategy and your cost structure to get things back on track.

5. Cash Flow from Operations (CFO)

Cash flow from operations shows you how much actual cash is flowing into your business from day-to-day operations. Profit on paper doesn’t always mean money in the bank. CFO gives you the real picture of whether your company is generating enough cash to sustain itself and invest in growth.

Actionable Insight: Make sure your operating cash flow is consistently positive. If it’s not, you may need to rethink how you’re managing your working capital or collecting receivables.

Why Tracking These Metrics Over Time is Crucial

Tracking these metrics in isolation won’t give you the full picture. You need to watch how they evolve over time—month over month, quarter over quarter. It’s the trends that tell you where things are headed. A small dip or spike might not seem like a big deal in the moment, but over time it can signal major problems or opportunities.

When you have a clear view of these key financial metrics, you can make smarter decisions, faster pivots, and confidently drive your business forward. You’ll know when to double down, when to cut back, and when to course-correct.

Closing Thoughts

If these numbers aren’t clear to you, or if numbers just aren’t your thing, don’t stress. That’s where we come in. Book a free consultation, and we can help you gain clarity, understand what these metrics are telling you, and ensure your business is moving in the right direction.