Glossary

Key Metrics Every Business Plan Should Include

A strong business plan centers on the right metrics: the quantitative indicators that reveal performance trends, validate strategic decisions, and guide resource allocation for sustainable growth. From revenue and gross margin to customer acquisition cost, lifetime value, churn, and cash runway, including these key metrics makes your plan actionable—helping investors, managers, and teams measure success, identify risks, and prioritize initiatives that drive long-term value.

Key Metrics (Business Plan)

Key Metrics (Business Plan): The quantifiable indicators a business uses to measure progress toward strategic goals, track operational performance, evaluate financial health, and demonstrate traction to stakeholders (e.g., revenue growth, customer acquisition cost, lifetime value, churn rate, gross margin, runway).

What are Key Metrics?

Key metrics are measurable, quantifiable indicators that show how well a business is achieving its strategic objectives. They translate high-level goals into trackable data points across:

Financial (e.g., revenue, gross margin, burn rate)

Customer (e.g., acquisition cost, lifetime value, churn)

Operational (e.g., lead time, conversion rate, capacity utilization)

Product/engagement (e.g., active users, retention, feature adoption)

Effective key metrics are specific, relevant to the business model, time-bound, comparable over periods, and directly tied to decision-making (actionable).

They help diagnose performance, validate assumptions, forecast outcomes, prioritize resources, and communicate progress to stakeholders.

Choose metrics that align with core drivers of value, are reliably measurable, and can be influenced by management actions.

Financial Metrics

Critical financial metrics quantify a company’s profitability, liquidity, efficiency, and capital needs. Include them in your business plan to demonstrate financial health, forecast viability, and justify funding requests.

Key financial metrics to include

Revenue (Sales): total income from goods or services. Formula: sum of sales over the period. Use: shows market traction and growth trends.

Revenue Growth Rate: percentage change in revenue period over period. Formula: (Current − Prior) / Prior. Use: supports scaling forecasts and investor appeal.

Gross Profit and Gross Margin: Gross profit: revenue − cost of goods sold (COGS). Gross margin (%): gross profit / revenue. Use: demonstrates unit economics and pricing viability.

Operating Income (EBIT) and Operating Margin: EBIT: gross profit − operating expenses. Margin: EBIT / revenue. Use: assesses core profitability before financing and taxes.

Net Income and Net Margin: profit after all expenses. Margin: net income / revenue. Use: indicates bottom-line performance and ROI.

EBITDA and Adjusted EBITDA: earnings before interest, taxes, depreciation, and amortization (plus one-time adjustments). Use: compares operational cash performance across companies.

Cash Flow from Operations: actual cash generated by core operations. Use: evaluates liquidity and sustainability.

Free Cash Flow (FCF): cash from operations − capital expenditures. Use: shows cash available for growth, debt repayment, or distributions.

Burn Rate and Cash Runway: monthly cash outflow (burn). Runway: cash balance / monthly burn. Use: for early-stage firms to quantify time to next financing or breakeven.

Working Capital and Current Ratio: Working capital: current assets − current liabilities. Current ratio: current assets / current liabilities. Use: measures short-term liquidity.

Break-even Point: sales level where revenue = total costs. Use: sets sales targets and timing for profitability.

ROI / ROA / ROE: returns relative to invested capital, assets, or equity. Use: demonstrates efficiency of capital use.

Debt Metrics: debt-to-equity; interest coverage ratio (EBIT / interest expense). Use: assesses leverage risk and borrowing capacity.

Customer-Related Financials: revenue per customer, contribution margin per customer, CAC payback period. Use: connects customer metrics to financial outcomes.

How to present them in the plan

Executive snapshot: include a concise table of key KPIs with current values and 12–36 month projections.

Assumptions: list revenue drivers, pricing, unit economics, seasonality, and cost assumptions behind projections.

Scenarios: provide base, optimistic, and downside cases with impacts on runway, break-even, and funding needs.

Trend charts: show revenue, gross margin, EBITDA, cash balance, and runway over time.

Sensitivity analysis: illustrate how changes in sales, pricing, or CAC affect profitability and runway.

Benchmarks and targets

Use industry benchmarks where possible (e.g., gross margin, churn-adjusted CAC payback, typical EBITDA margins).

Set near-term and medium-term targets tied to milestones: reaching break-even, achieving positive operating income, or extending runway to the next funding milestone.

Practical tips

Focus on high-impact metrics tied to your model (e.g., for SaaS: ARR, gross margin, CAC payback, LTV/CAC).

Reconcile projections with cash flow; profitable GAAP results can still produce negative cash flow.

Highlight planned improvements (cost reductions, price increases, upsell strategies) and quantify expected changes.

Be realistic and transparent about assumptions; investors expect credible, stress-tested numbers.