If I asked you to describe the financial fitness of your business in just a sentence, how confident would you feel? Many leaders watch top-line revenue or follow profitability, believing these numbers tell the whole story. In reality, there are several health signals that, if observed closely, can act as an early warning system and guide for steady growth. Today, let me walk you through five essential signals every business should monitor. Along the way, I’ll share some surprising angles you might not have considered and questions you can ask yourself to make these metrics truly work for you.

“Accounting is the language of business.” – Warren Buffett

Let’s begin with a topic easily overlooked: operating cash flow. While most of us know the importance of positive cash flow, the subtlety lies in the pattern. A business showing stable or growing cash generated from its core operations is one with solid footing. Yet, some companies paint a rosy picture by selling assets or raising funds to cover operational gaps. That’s like covering a roof leak with a new paint job. I always ask, where is the cash really coming from? Focusing on the consistency of cash created purely from sales and services—while setting aside financing and one-time moves—reveals if day-to-day operations are sustainable. You might be surprised to know that in my experience with fast-growing startups, sudden spikes or drops often pointed to underlying issues long before earnings reports caught up. Monthly reviews of operating cash flow trends can catch challenges before they become threats.

“Beware of little expenses; a small leak will sink a great ship.” – Benjamin Franklin

Now, think about gross profit margin. Here’s a metric that tells two stories at once: your company’s pricing power and its command over costs. Stability in gross profit margin can be more telling than size alone. Why does this matter? Too often, businesses focus only on increasing revenue and overlook the erosion of margin. For example, a retailer could see robust sales but, if discounts are too deep or supplier costs creep up, the margin shrinks. On the flip side, a company that can hold its margin even during cost pressure is truly wielding competitive strength. Seasonality is another layer. Have you ever noticed how your margin changes throughout the year? Comparing like-for-like seasonal periods provides much more accurate signals than year-averages, preventing overreaction to temporary dips. Ask yourself: Are my margins steady? Am I adjusting pricing and purchasing strategies at the right times?

“Price is what you pay. Value is what you get.” – Warren Buffett

Let’s pivot to a sign that’s relatively new as a go-to health check—Customer Acquisition Cost (CAC) versus Customer Lifetime Value (LTV). If you’re not familiar, CAC is how much you spend to win a new customer; LTV is the total profit you expect from that customer over their relationship with your business. For companies that invest heavily in marketing, this relationship is everything. The golden rule? LTV should exceed CAC by a comfortable margin. But here’s the twist: too many companies only measure initial acquisition, not the ongoing cost of keeping customers happy. Are you tracking what it takes to get repeat business? I recall one tech firm that celebrated low CAC but was spending a fortune on support after the sale, erasing profit quietly in the background. Scrutinize every touchpoint, and you’ll be able to harness growth sustainably rather than fueling a revolving door of short-lived sales.

“Your most unhappy customers are your greatest source of learning.” – Bill Gates

Few areas expose operational discipline faster than inventory turnover. In retail and manufacturing especially, the speed at which stock moves through your business speaks volumes. High turnover signals strong demand and efficient management; low turnover hints at overstocking or waning interest. It’s tempting to celebrate a warehouse full of goods, but idle inventory ties up cash that could be working far harder elsewhere. One mistake I often see is ignoring the context: a spike in turnover could mean stockouts and lost sales, while a drop could signal anticipation of a big promotion or market shift. The real value comes from benchmarking turnover against peers and reflecting on trends—not just reacting to numbers in isolation. Have you compared your turnover to industry norms recently? And do you regularly look for obsolete or slow-moving inventory that silently drains resources?

“It’s not the big that eat the small… it’s the fast that eat the slow.” – Jason Jennings

Finally, let’s look at the debt service coverage ratio (DSCR). While it may sound technical, this signal is straightforward: it measures your earnings against the payments you owe on debt. A strong DSCR means your company generates enough cash to comfortably pay its debts, while a weak ratio suggests financial strain is looming. In times of low interest rates, it’s easy for companies to become comfortable taking on more debt. But with changing economic conditions, this ratio can swing quickly. Here’s something many miss—companies sometimes focus only on long-term debt, forgetting about upcoming balloon payments or variable-rate loans that can impact cash flow overnight. Make it a habit to check your DSCR whenever you plan new borrowing or face revenue uncertainty. How would your ratio look if sales dipped by 10%? Planning for stress scenarios keeps you prepared for the unexpected.

“Do not save what is left after spending, but spend what is left after saving.” – Warren Buffett

Beyond the mechanics of tracking these signals, what does it mean to put them to work? In companies I’ve worked with, the discipline of setting regular monthly review cycles is transformative. Data becomes actionable when you frequently compare it to both your past performance and to similar companies in your sector. For example, a retailer noticing declining inventory turnover just before the holiday season could pivot with promotions or tighter purchasing, sidestepping lost revenue and wasted capital. Similarly, technology companies often watch CAC vs. LTV closely to know when to pull back on new ad campaigns or invest further in customer success programs. Even the smallest businesses, armed with affordable cloud dashboards or tailored spreadsheets, can track these metrics without needing an in-house finance expert. The simplicity of regular, focused reviews can make all the difference.

Do you know how your numbers stack up? Are seasonal shifts skewing your perceptions? What would you do today if two or more signals showed troubling trends?

There’s another piece often overlooked—learning from exceptions. Occasionally, a negative metric uncovers opportunity rather than just threat. Take a low inventory turnover coinciding with a product revival or a sales campaign. Sometimes, the story behind the numbers is more valuable than the metric itself. Keep asking: is this a warning sign, or is it a calculated risk?

“However beautiful the strategy, you should occasionally look at the results.” — Winston Churchill

Tracking financial health is about more than data entry and ticking boxes. It’s an attitude shift—moving from reactive firefighting to proactive stewardship. If you look for these signals early and often, patterns emerge. Companies that treat these five signals as conversation starters, rather than report-card grades, often achieve steadier and more reliable growth. In fact, research shows businesses that monitor these specific signals see far fewer cash flow crunches, bounce back faster from setbacks, and secure a competitive edge—regardless of industry or scale.

Whether you’re a founder, a team lead, or an owner navigating uncertain markets, my advice is simple. Choose metrics that reveal the hidden currents beneath your surface-level results. Set up systems for regular review—even a basic spreadsheet works wonders. Share findings with your team; fresh eyes often spot what you might have missed. Adjust your strategy as soon as you sense a pattern, not when a crisis erupts.

“Risk comes from not knowing what you’re doing.” – Warren Buffett

Each of these financial health signals delivers insights you can act on today. Their magic doesn’t lie in complexity but in consistency. Are you ready to look closer at the health of your business? What would you change if you knew that each of these metrics could predict the story of your next year?