Startup Finance Cheat Sheet: Every Number Founders Must Know
A board member leans in and asks, “What’s your runway?” The room goes quiet. You know the answer is somewhere in a spreadsheet, but the spreadsheet isn’t in the room - you are.
This is the moment that separates founders who command their numbers from founders who get managed by them. The good news: the math that runs a business fits on a single page.
This is that page. Keep it close before any meeting where the numbers matter.
Why this matters
Most founders are brilliant at the product and shaky on the finances. That gap is where bad deals get signed, runways run out by surprise, and “we’re growing fast” quietly hides “we’re losing money on every sale.”
You don’t need an MBA. You need maybe two dozen formulas and a handful of benchmarks - and the ability to recall them without flinching. When you can answer a sharp financial question in one breath, you signal something investors care about deeply: this person knows where the money is.
Think of everything below as the dashboard of your business. You don’t stare at it constantly, but you’d never drive without it.
The three numbers that tell the whole story
Before the formulas, here’s the mental model that holds them together. Every business runs on three things, and they answer three different questions:
- Revenue proves people want what you sell.
- Profit proves the model works - you make more than you spend to deliver.
- Cash proves you survive long enough to find out.
A company can have rising revenue, no profit, and three weeks of cash left. Watching only the top line is how that happens. Watch all three, always.
Profit: what you actually keep
Profit comes in layers, like peeling an onion. Each layer subtracts more costs and tells you something different.
- Gross Profit = Revenue − COGS (the direct cost of making the thing). Example: $100k revenue − $30k cost = $70k.
- Gross Margin % = Gross Profit ÷ Revenue × 100. So $70k ÷ $100k = 70%. This is how profitable each sale is before overhead.
- Net Profit (the “bottom line”) = Revenue − COGS − operating expenses − interest − tax. The money truly left over.
- Net Margin % = Net Profit ÷ Revenue × 100. A $15k net profit on $100k revenue is a 15% net margin.
- EBITDA = Net Profit + Interest + Tax + Depreciation + Amortization. A rough proxy for cash-generating power that strips out financing and accounting choices.
Real-world read: Two companies both report $100k in sales. One keeps 70 cents per dollar at the gross level; the other keeps 30. The first can afford to spend heavily on growth and still win. Margin is leverage.
Markup vs margin - the trap that costs real money
These look similar and wreck pricing decisions when confused, because they divide by different things.
- Markup % = (Price − Cost) ÷ Cost × 100. A $50 item sold for $100 is a 100% markup.
- Margin % = (Price − Cost) ÷ Price × 100. That same item is a 50% margin.
Same transaction, two very different numbers. If you think you’re earning a “100% margin” when you actually have a 50% margin, you’ll badly overestimate how much you keep. Markup divides by cost; margin divides by price. Tattoo that on your brain.
Knowing when you break even
Break-even is the moment sales finally cover your costs. To find it, you first need contribution margin - what each sale contributes after its own variable cost.
- Contribution Margin per unit = Price − Variable Cost. Sell at $100, variable cost $40, you net $60 per unit toward fixed costs.
- Break-even (units) = Fixed Costs ÷ Contribution Margin. With $30k in fixed costs: $30k ÷ $60 = 500 units.
- Break-even (revenue) = Fixed Costs ÷ Gross Margin %. So $30k ÷ 0.60 = $50k in sales.
Once you cross that line, every additional sale drops mostly to profit. Knowing your break-even point turns “are we doing okay?” into a specific, answerable target.
The balance sheet, in one line
The whole balance sheet rests on one identity that always holds:
Assets = Liabilities + Equity. Example: $200k in assets = $120k owed + $80k owned. Everything you have was funded either by debt or by ownership.
One number to watch here is Working Capital = Current Assets − Current Liabilities ($90k − $50k = $40k). It’s the short-term cushion that keeps you paying bills while you wait on customers to pay you.
Customer economics: are your customers worth it?
This is where “growth” gets a reality check. Winning customers costs money; you need to know if the economics of each sale pay you back.
- CAC (Customer Acquisition Cost) = total sales and marketing spend ÷ new customers won. $10k ÷ 100 = $100 per customer.
- LTV (Lifetime Value, simple version) = (ARPU × Gross Margin %) ÷ Churn rate. If a customer pays $50/month at 80% margin and 5% monthly churn: ($50 × 0.8) ÷ 0.05 = $800.
- LTV:CAC Ratio = LTV ÷ CAC. Here, $800 ÷ $100 = 8:1.
- CAC Payback = CAC ÷ (ARPU × Gross Margin %). $100 ÷ ($50 × 0.8) = 2.5 months to earn the customer back.
Mini case study: Imagine you spend $100 to win a customer worth $800. That’s a 3:1 ratio at the worst acceptable level - and you’re at 8:1. The smart question becomes: should you spend more to acquire customers? Often, yes. A very high LTV:CAC isn’t a trophy; it can be a sign you’re leaving growth on the table.
Recurring revenue and growth
If you sell subscriptions, these are your heartbeat.
- MRR (Monthly Recurring Revenue) = sum of all monthly subscriptions. 200 users × $50 = $10k.
- ARR (Annual Recurring Revenue) = MRR × 12 = $120k.
- Churn rate = customers lost ÷ customers at the start. 10 ÷ 200 = 5%.
Churn is the leak in the bucket. You can pour customers in the top, but if 5% drain out every month, growth gets expensive fast. The best companies reach net revenue retention above 100% - meaning existing customers spend more over time, so revenue grows even if you never add a single new customer.
Cash and survival
Profit is an opinion shaped by accounting; cash is a fact in the bank. These tell you how long you live.
- Net Burn = cash spent − cash received per month. $80k out − $30k in = $50k burned.
- Runway = cash in bank ÷ net monthly burn. $600k ÷ $50k = 12 months.
- Burn Multiple = net cash burned ÷ net new ARR. $600k ÷ $400k = 1.5 (how many dollars you burn to add one dollar of recurring revenue).
Default alive or default dead is the question underneath all of these: at your current growth and spending, do you reach profitability before the cash runs out? If yes, you’re default alive and negotiating from strength. If no, you’re default dead and the clock is your boss.
Investor math: what a raise really does
When you raise money, ownership shifts. Know exactly how before you sign.
- Post-money Valuation = Pre-money Valuation + New Investment. $8M + $2M = $10M.
- Investor Ownership % = Investment ÷ Post-money Valuation. $2M ÷ $10M = 20%.
- Dilution (your new %) = Old % × (1 − new investors’ %). 100% × (1 − 0.20) = 80%.
Raising $2M at an $8M pre-money means the new investor owns 20%, and your slice shrinks from 100% to 80%. The pie got bigger; your share of it got smaller. Both can be good - just never be surprised by it.
Benchmarks: is your number healthy?
A formula gives you a number. A benchmark tells you whether to celebrate or worry.
| Metric | Healthy target |
|---|---|
| Gross Margin - SaaS/software | 70–85%+ |
| Gross Margin - services | 40–60% |
| Gross Margin - physical/retail | 30–50% |
| LTV:CAC ratio | ≥ 3:1 (below 1:1 = losing money per customer) |
| CAC payback period | under 12 months (under 6 is excellent) |
| Monthly churn (SMB SaaS) | under 3–5%; lower is much better |
| Net revenue retention | above 100% |
| Runway - comfortable | 18+ months; raise or cut by 12; emergency under 6 |
| Burn Multiple | under 1 great · 1–1.5 good · 1.5–2 ok · over 2 concerning |
| Rule of 40 (growth % + margin %) | ≥ 40% |
| Magic Number | above 0.75 (efficient to spend more on growth) |
| Net margin - sustainable business | 10–20%+ (varies by industry) |
The Rule of 40 deserves a callout: add your growth rate and your profit margin, and the sum should clear 40%. Grow at 30% with a 15% margin? That’s 45% - healthy. It rewards either fast growth or strong profit, and punishes companies that have neither.
Common misconceptions
A few of these confusions show up in real boardrooms and cost real money:
- Markup ≠ Margin. Different denominators, very different numbers. A “100% markup” is a 50% margin.
- Profit ≠ Cash. Profit is accrual accounting; cash is your bank balance. You can be profitable on paper and still bounce payroll.
- Gross burn ≠ Net burn. Runway is calculated on net burn (after the cash coming in). Use gross and you’ll undercount your runway and panic early - or use the wrong one and run out late.
- Revenue growth ≠ a healthy business. Fast growth on broken unit economics just means you lose money faster. Always check margin and churn behind the growth headline.
How to use this
Don’t memorize the whole sheet cold. Do this instead:
- Pull your own eight numbers today. Cash in bank, net monthly burn, runway, MRR and growth rate, gross margin, CAC and LTV, churn, and default alive/dead. Write them on one index card.
- Update them weekly. Numbers you touch often become numbers you remember. Sunday-night five-minute refresh is enough.
- Rehearse the answers out loud. Before any investor call or board meeting, say each number as a full sentence. “We have 12 months of runway at a $50k net burn.”
- Stress-test one assumption. Ask “what breaks first if growth stalls?” The answer is usually runway - and now you’ll see it coming.
- Keep this page open during meetings. There’s no prize for doing the math from memory. There’s a big prize for getting it right.
Conclusion
If you remember one sentence, make it this: revenue proves people want it, profit proves the model works, and cash proves you survive long enough to find out. Watch all three - never just the top line.
The metrics on this page are the what. The harder, more interesting question is the why behind the why: when two healthy-looking startups raise at the same valuation, why does one quietly become a category leader and the other stall? The answer hides in how their unit economics compound over time - and that’s a number no single formula can show you. Worth chasing next.
Frequently asked questions
What financial numbers should a founder know by heart?
Cash in the bank, net monthly burn, runway, monthly revenue and growth rate, gross margin, CAC and LTV, churn, and whether you're default alive or default dead. An investor expects these instantly, like your own phone number.
What is a good LTV to CAC ratio?
Aim for at least 3:1, meaning a customer is worth three times what you paid to acquire them. Below 1:1 you lose money on every customer, and far above 3:1 can mean you're underspending on growth.
What's the difference between markup and margin?
Both compare price and cost, but they use different denominators. Markup divides profit by cost; margin divides profit by price. A 100% markup is only a 50% margin, which is why people get burned by mixing them up.
How do you calculate runway?
Divide the cash in your bank by your net monthly burn (cash out minus cash in). If you have $600k and burn $50k a month, you have 12 months of runway.
What is the Rule of 40?
Add your revenue growth rate to your profit margin. If the total is 40% or more, you're balancing growth and profitability in a way investors consider healthy. For example, 30% growth plus 15% margin equals 45%.
What does default alive mean?
Default alive means that at your current growth and spending, you'll reach profitability before the cash runs out. Default dead means you won't, so you must raise money or cut costs to survive.