The numbers that drive decisions

You do not need to be an accountant. You need to know which few numbers carry information about the business, and — more importantly — what each one does not tell you.

Margin tells you how much of each sale you keep, but not how much you had to spend to make the sale. A high-margin business can still lose money every month.

THE FOUR THAT ARE ACTUALLY DIFFERENT QUESTIONS

  margin      = (revenue - direct cost) / revenue
                "per sale, how much do I keep?"        <- PER UNIT

  break-even  = fixed costs / (price - variable cost per unit)
                "how many units before I stop losing?" <- THRESHOLD

  cash runway = cash on hand / monthly net burn
                "how many months until I am out?"      <- SURVIVAL

  contribution= price - variable cost per unit
                "is this sale worth making at all?"    <- THE FLOOR

# The trap: a profitable business dies of cash, not of loss.
# Profit is an accounting period; cash is a date.

Break-even is the threshold question: how many units must I sell before the fixed costs are covered. Contribution margin is the floor question: below this price, each sale actively destroys value — and that is why "we will lose money but make it up in volume" is usually false.

Cash runway is the survival question, and it is the one that kills companies. Profit is measured over an accounting period; cash is measured on a date. A business can be profitable on paper and unable to make payroll — because the money is sitting in receivables, or tied up in inventory. Founding teams that watch profit and ignore runway are the classic failure.