14 Must-Know Financial KPIs Every Business Should Track in 2025

Starting a business is no small feat. It requires a sound business strategy, funding, decision-making skills, grit, a network of support, and a helping of good luck. There are ways, however, to stay on track, and business owners who watch their numbers like a hawk are more likely to see success.

Those numbers are often referred to as financial KPIs. Neglecting your financial KPIs is like flying blind and hoping the results work out in your favor. Understanding them can help support your company’s financial health and give your business a better chance of surviving and thriving.

What are financial KPIs?

Financial key performance indicators (KPIs) are metrics tracking a company’s financial performance against business objectives like a target revenue growth rate, profit margin, and operational efficiency. Typically, financial KPIs fall into categories such as profitability, liquidity, efficiency, leverage, cash flow, and growth, and they’re derived from a company’s financial statements.

Whether you want to hire a new employee, raise capital, or purchase a piece of equipment, your KPIs are a North Star to guide informed decisions for your company’s financial performance.

14 key financial KPIs for ecommerce businesses

1. Gross profit margin
2. Net profit margin
3. Working capital
4. Current ratio
5. Debt-to-equity ratio
6. EBITDA
7. Operating cash flow
8. Free cash flow
9. Customer acquisition cost
10. Customer lifetime value
11. Churn rate
12. Return on equity
13. Revenue growth rate
14. Burn rate

Ecommerce businesses use many of the same financial metrics as other businesses. Some of the more important financial KPIs include:

1. Gross profit margin

Gross profit margin is a profitability ratio showing how much money is left after an item is sold and all costs of goods sold (COGS) are paid. So, if your item costs $3 to make, you need to sell it for more to attain a positive gross profit margin. This KPI helps you learn how to price your products to ensure you cover costs and your company generates profit. It also tells you how profitable you are before you factor in overhead costs like space rental, employee pay, or marketing spend.

Here’s the equation to calculate gross profit margin:

Total revenue – COGS = Gross profit margin

2. Net profit margin

If gross profit margin is how much money is left after accounting for COGS, net profit margin is what remains after subtracting all expenses, including overhead and taxes. What makes a good net profit margin varies by industry. It can be as little as 1% for large retailers with physical spaces like supermarkets and as much as 30% or more for software businesses with little overhead. You can decide the net profit you want to make, take into account market demand, and reverse engineer your prices, including the overhead costs it takes to run your business.

Here’s the equation to calculate net profit margin:

Total revenue – Total costs = Net profit margin

3. Working capital

Working capital is the cash you have available to cover day-to-day operations.

It’s the difference between:

• Current assets: things in your company with cash value

• Accounts receivable: money owed to your company

• Current liabilities: financial obligations like payroll, accounts payable, and taxes

Here’s the equation to calculate working capital:

Current assets – Current liabilities = Working capital

4. Current ratio

The current ratio measures overall liquidity and your company’s ability to pay short-term obligations using short-term assets like cash, investment securities, inventory, and accounts receivable. Current ratio is determined by dividing current assets by current liabilities to show how many times over you can cover daily operating expenses.

Here’s the equation to calculate current ratio:

Current assets / Current liabilities = Current ratio

5. Debt-to-equity ratio

Your debt-to-equity ratio shows how much of your business is financed by debt versus ownership capital. The debt-to-equity ratio is widely used by banks and investors to assess a business’s creditworthiness. A lower ratio—more equity than debt—typically means less risk and better cash flow. However, too little debt can signal missed growth opportunities. In some cases, borrowing can fuel business expansion, provided you can earn enough to cover the interest payments.

Debt-to-equity ratio is calculated by dividing total liabilities by total equity, which is what would be left if your business were liquidated.

Here’s the equation to calculate debt-to-equity ratio:

Total liabilities / Total equity = Debt-to-equity ratio

6. Earnings before interest, taxes, depreciation, and amortization (EBITDA)

EBITDA stands for earnings before:

• Interest (on loans or debt)

• Taxes (income or business taxes)

• Depreciation (wear and tear on tangible assets like equipment)

• Amortization (gradual expensing of intangible assets like patents or software)

It reflects a company’s operating cash flow before key expenses come into play and can help you measure your company’s profitability. EBITDA is often used to compare businesses across industries or capital structures and assess their cash-generating potential for investors or lenders.

Here’s the equation to calculate EBITDA:

Earnings + Taxes + Depreciation + Amortization = EBITDA

7. Operating cash flow

Operating cash flow (OCF) measures the cash your company pays to cover its day-to-day activities. It shows whether your core business operations bring in enough to sustain the company without outside financing. It also factors in depreciation, amortization, and changes in working capital. Tracking it helps assess sustainability, liquidity, and your capacity to fund future growth.

Here’s the equation to calculate operating cash flow:

Net income + Non-cash expenses + Changes in working capital = Operating cash flow

8. Free cash flow

Free cash flow is the cash left after covering operating expenses and capital expenditures for maintaining or buying equipment and technology. Unlike net income, which can reflect money yet to be received from customers, it shows actual cash on hand. More free cash flow means more flexibility to grow, pay off debt, pay dividends to shareholders, or invest—and it signals overall business health to investors. Regularly tracking it helps you plan for growth.

Here’s the equation to calculate free cash flow:

Cash flow – Capital spending = Free cash flow

9. Customer acquisition cost (CAC)

Customer acquisition cost (CAC) is the total amount spent to gain one new customer. It’s calculated by dividing total sales and marketing costs by the number of new customers in a given period. You want your CAC to be much lower than the product costs to ensure you’re turning a profit. A good CAC varies by industry—ranging from a few dollars to gain a customer who downloads an app to thousands for gaining a corporate software subscriber.

Here’s the equation to calculate customer acquisition cost:

Total sales & marketing costs / Number of new customers added = CAC

10. Customer lifetime value (LTV)

Customer lifetime value (LTV) is the total revenue a business can expect to earn from a customer during the entire relationship. It helps determine how much is reasonable to spend on acquiring and retaining customers. LTV and CAC work together—dividing LTV by CAC gives a ratio showing how much you earn for every $1 spent on acquisition. A healthy LTV–CAC ratio is typically about 3:1 ($3 earned for every $1 spent to acquire). A ratio of 1:1 or lower suggests you’re spending too much to acquire customers, while a ratio that’s too high (6:1 or more) could indicate you’re under-investing and missing opportunities to add customers.

Here’s the equation to calculate LTV:

Average purchase value × Purchase frequency × Customer lifespan = LTV

11. Churn rate

Churn rate measures the percentage of customers who stop buying over a specific time period. It’s an especially critical metric for subscription-based businesses. A high churn rate hurts growth, LTV, and profitability, and it often signals an issue with your customer satisfaction or pricing. If you’re losing customers faster than gaining them, it’s time to examine what’s going wrong. While it’s easy to focus on acquiring new customers, reducing churn is often more cost-effective.

Here’s the equation to calculate churn rate:

Lost customers / Total customers x 100 = Churn rate

12. Return on equity

Return on equity (ROE) is another ratio telling you how efficiently you’re using money invested by founders or shareholders to generate profits. In other words, it answers the question of whether you’re earning a return on capital. A low or even negative ratio may be normal for early-stage investments that are not yet profitable. However, a consistently low ratio could mean you’re underperforming and making poor use of investors’ capital.

Here’s the equation to calculate return on equity:

Net income / Shareholders’ equity = ROE

13. Revenue growth rate

Revenue growth rate shows the increase in a company’s revenue from one time period—a month, quarter, or year—to the next. You typically want to see a continual climb to justify higher valuations or increased investment based on the prior period’s net sales to justify higher valuations. It can also help you evaluate the effectiveness of your sales and marketing strategies and provide insights into the overall demand for your products or services in the market.

Here’s the equation to calculate revenue growth rate:

Ending period revenue – Starting period revenue / Starting period revenue x 100 = Revenue growth rate

14. Burn rate

Burn rate, an especially important metric for startups, is the rate at which a company spends its cash before generating positive cash flow. It’s the way businesses understand how long they can operate before needing more funding or earning a profit. 

Burn rate is measured two ways: as a gross rate, typically total monthly operating costs; or a net rate, which accounts for any income. Most people use the net rate, as it considers both operating expenses and revenue generated.

Let’s say that your business spends $100,000 per month on operations and brings in $30,000 monthly. When you subtract the two, you’ll see you’re burning $70,000 in cash every month. How long can you sustain operations before needing more money?

Here’s the equation to calculate burn rate:

Monthly operating expenses – Monthly revenue = Net burn rate