Five numbers every e-commerce founder should watch

It's easy to have a record sales month and assume everything's fine. The trouble is that revenue hides as much as it shows. If you want to know whether your business is genuinely healthy, here are the five numbers we'd start with.

1. Contribution margin

Contribution margin is what's left from a sale once you take off the costs that come with that sale, so product cost, shipping, payment fees and returns. It tells you whether a product actually makes money before overheads. If you only look at gross margin, you're missing the costs that quietly build up as you scale.

2. Blended MER

Channel-level ROAS can flatter you. Your blended marketing efficiency ratio, total revenue divided by total marketing spend, tells you how hard your marketing is working overall. Watch the trend. If it's falling as you spend more, growth is getting more expensive and it's worth understanding why.

3. Cash conversion cycle

How long is your cash tied up between paying for stock and getting paid by customers? For stock-heavy brands this is make or break. A profitable business can still run out of cash if that cycle is too long, and it's one of the most common reasons good businesses get into trouble.

4. Inventory days

Too much stock ties up cash and risks markdowns. Too little costs you sales. Keeping an eye on how many days of stock you hold, by product rather than just overall, keeps that balance honest.

5. A rolling 13-week cash forecast

Not a metric exactly, but the single most useful report you can have. A live view of the next thirteen weeks of cash in and out means you're never blindsided, and you can invest with confidence when the timing is right.

Where to start

If you track nothing else, start with contribution margin and a cash forecast. Get those two right and most of the big, scary decisions become a lot clearer. If you'd like a hand putting them in place, that's exactly the sort of thing we do.