KPIs That Matter: Ditch Vanity Metrics
Likes don’t pay payroll. Page views won’t fund your tax bill. If you want a business that prints predictable cash, you need a handful of actionable KPIs you can check weekly and use to make decisions—raise prices, pull discounts, chase receivables, cut spend. Here’s the short list, the formulas, and exactly how to implement them.
First—what makes a KPI “actionable,” not vanity?
Tied to cash or capacity. If moving the number doesn’t change your cash this quarter or your ability to deliver, it’s probably a vanity metric. HBR’s been warning leaders for years that misaligned metrics undermine strategy. Build metrics that reinforce the strategy you actually want.
You can influence it weekly. If a number only budges with annual projects, it belongs on a quarterly dashboard—not your weekly scorecard.
It has an agreed target and owner. One person is responsible, and there’s a clear “good/bad” line.
The 5–Line Weekly Scorecard (base model)
Track these five every Friday, trend them, and run the business off the changes:
Collected Revenue (this week)
Gross Margin %
Cash Conversion (DSO/CCC)
Operating Runway (weeks)
Selling Efficiency (LTV:CAC or Win Rate)
Yes, you can add more later. But if you can’t keep these five green, more charts won’t save you.
KPI #1: Collected Revenue (not invoiced)
What it is: Cash in the door this week.
Why it matters: Cash is oxygen. Invoices are promises.
Actions to move it: Offer fast-pay incentives, invoice partials, bill milestones sooner, tighten payment terms.
Tip: “Collected vs. Invoiced” on the same line exposes fantasy revenue immediately.
KPI #2: Gross Margin %
Definition: (Revenue − Cost of Goods Sold) ÷ Revenue. Measures how much you keep after direct delivery costs.
Owner moves:
Raise prices or narrow scope.
Kill low-margin add-ons.
Standardize delivery (templates/SOPs) to cut labor hours.
Targets: Vary by industry. Trend up and defend the floor you need to hit owner pay, taxes, and profit.
KPI #3: Cash Conversion
Pick one based on your model:
Service businesses with AR: DSO (Days Sales Outstanding)
Definition: Average days to collect receivables. Lower is better.
Formula (common): (Average A/R ÷ Credit Sales) × Days.
Owner moves:
Require ACH/CC on file; auto-bill on due date.
Late fees after 7 days; stop work at 15 days.
Invoice partials early and often.
Product/e-com with inventory: CCC (Cash Conversion Cycle)
Definition: CCC = DIO + DSO − DPO; measures days from paying suppliers to collecting from customers. Shorter = stronger liquidity.
Owner moves:
DIO: Cut SKUs, improve forecasting, increase turns.
DSO: Push prepay; tighten terms.
DPO: Negotiate longer terms without torching supplier trust.
Pick one metric. Post it weekly. Attack the bottleneck.
KPI #4: Operating Runway (weeks)
Definition: (Operating cash available ÷ average weekly operating expenses).
Why it matters: Runway dictates how bold you can be on pricing, hiring, and inventory.
Owner moves:
Trim non-essential software/contractors.
Accelerate collections; slow payables (ethically).
Raise prices or prepayment to extend runway.
KPI #5: Selling Efficiency (choose one)
LTV:CAC (subscriptions/recurring services)
CAC: Sales + marketing cost ÷ new customers.
LTV: Value per customer × average lifespan (or contribution margin × retention). Aim for LTV at least 3× CAC.
Owner moves:
Increase prices/ARPU with good-better-best packaging.
Reduce CAC by cutting weak channels and doubling down where payback is fastest.
Net Revenue Retention (NRR) (subscriptions)
Definition: Revenue from existing customers after upgrades/downsells/churn. >100% is expansion; <100% means leaks.
Owner moves:
Add expansion paths (add-ons, seats, priority support).
Fix onboarding bottlenecks driving early churn.
If you’re not subscription-based, use Win Rate (qualified proposals won ÷ total sent) with a target cycle time.
How to build your weekly scorecard in 60 minutes
Step 1 — Pick your five
Use the base model above. If you hold inventory, use CCC; if you invoice, use DSO; if you’re subscription/retainer heavy, use LTV:CAC or NRR.
Step 2 — Define formulas and owners
Write each formula exactly as you’ll calculate it and assign a single owner. Post the targets next to the metric so there’s no debate.
Step 3 — Set the Friday ritual
Every Friday before lunch: update numbers, review deltas, assign 1–2 actions. Keep the meeting tight (15–30 minutes). Weekly scorekeeping with a fixed cadence is how small teams actually move KPIs.
Step 4 — Wire data once
Pull revenue and COGS straight from your accounting tool.
Export A/R aging for DSO.
Pull inventory and payables for CCC.
Track ad spend and new customers for CAC; MRR/expansion/churn for NRR.
Step 5 — Tie actions to movements
If a number goes red, you already know the lever to pull (examples below). No debating, just execute.
“If red, then do ___” playbook (copy/paste into your scorecard)
Collected Revenue down week-over-week
Send 10 fast-pay offers to open invoices (2% in 5 days).
Invoice partials for work-in-progress today.
Push a 2-week Jumpstart offer to 5 warm accounts.
Gross Margin % below target
Raise price on next quote by +10%; deliver with options.
Remove the lowest-margin add-on for the next 30 days.
Standardize 1 recurring deliverable into a template.
DSO rising (collections slowing)
Flip slow clients to autopay; stop work at 15 days past due.
Shorten payment terms on new proposals (Net 7 + autopay).
Offer payment plans before due dates for at-risk accounts.
CCC lengthening (cash stuck longer)
Reduce purchase frequency; raise reorder points on slow movers.
Negotiate supplier terms +7–15 days; consolidate vendors.
Push preorders or deposits on high-ticket items.
Runway < 4 weeks
Freeze non-essential spend now.
Add a prepaid scope to three current clients.
Pull forward quarterly price review to this week.
LTV:CAC < 3:1
Kill one paid channel with worst payback; redeploy to best.
Add a mid-tier add-on to increase ARPU by +10–20%.
Tighten ICP and stop quoting off-profile leads.
NRR < 100%
Add a “save” offer at 60 days before renewal.
Launch quarterly business reviews for top 20% of accounts.
Package upsells (priority support, faster turnaround) into renewals.
Industry quick-starts
Services/Agencies/Consultancies
Collected Revenue, Gross Margin %, DSO, Runway, Win Rate.
Action: Put ACH/CC on file; milestone billing; Good/Better/Best pricing; stop work at 15 days.
Product/E-Com
Collected Revenue, Gross Margin %, CCC, Runway, Repeat Purchase Rate (or LTV:CAC if you have recurring).
Action: Kill slow SKUs, negotiate terms, require preorders on new inventory.
Subscription/Retainer
Collected Revenue (MRR/ARR), Gross Margin %, NRR, LTV:CAC, Runway.
Action: Upsell paths, onboarding SLAs, save-a-customer plays, churn analysis by cohort.
Common mistakes (and the fix)
Tracking too many numbers. Start with five. Earn the right to add a sixth.
Copying metrics from tech blogs. If it doesn’t touch this quarter’s cash or capacity, it’s a distraction.
No meeting cadence. Your scorecard is only as good as the Friday ritual. EOS-style scorecards work because they force weekly accountability.
Mini-playbook: set this up this week (90 minutes)
Choose your five and write the formulas and targets (15 min).
Assign owners and create a one-page sheet in Sheets/Excel/Notion (10 min).
Wire data sources (bank feed/accounting, A/R aging, inventory, ad spend) (30 min).
Schedule the Friday 20 and the Monday 20 (review + actions) (5 min).
Load the “if red, then do ___” actions above (10 min).
Run it for two weeks before you change anything (20 min).
Reference formulas & primers
Gross Margin (and margin types): clear formulas and differences. Investopedia+1
DSO (receivables speed): definition and calculation. Investopedia
CCC (inventory + receivables − payables): definition and components. Investopedia+1
CAC & LTV (and ratio): definitions, examples, and the 3:1 rule of thumb. Corporate Finance Institute+2Corporate Finance Institute+2
Why vanity metrics hurt strategy: HBR warnings on misaligned metrics. Harvard Business Review
CTA — Black Mammoth PowerHour: KPI Scorecard Build
In one focused PowerHour, we’ll build your five-line scorecard, wire the data, set targets and owners, and install a weekly cadence with “if red, then do ___” plays tailored to your model. You’ll leave with a working dashboard that drives decisions—not decoration.