Congratulations! Reaching $1 million in revenue is an incredible achievement (less than 10% of businesses ever get there). It’s proof that your vision is working, your customers see the value in what you offer, and you have a foundation for something even greater. Scaling your business to $10 million is the next step, and as you grow, financial clarity becomes even more critical. Understanding the right metrics and focusing on what matters most can position your business for long-term success.
Focus on Gross Margin
At the $1 million mark, revenue growth often takes center stage. As you scale to $10 million, gross margin becomes a vital metric to track. Gross margin reveals how efficiently your business produces or delivers its offerings by measuring what’s left after covering direct costs. Improving gross margins gives you more room to reinvest in growth and strengthens your profitability.
Monitor EBITDA for Operational Health
Earnings before interest, taxes, depreciation, and amortization (EBITDA) provides a clear view of your business’s operational profitability. It’s a key indicator of financial health and efficiency, making it essential for businesses scaling beyond $1 million. Lenders, investors, and buyers place significant emphasis on EBITDA across nearly every business model, as it demonstrates the ability to generate profits from core operations. Strong EBITDA performance is a cornerstone of financial stability and a crucial factor for attracting future opportunities.
Customer Lifetime Value (LTV) and Customer Acquisition Cost (CAC)
For businesses with subscription models or recurring revenue streams, understanding the relationship between LTV and CAC is crucial. LTV measures the total revenue a customer brings over their relationship with your company, while CAC reflects the cost of acquiring that customer. Even if you don’t have a recurring revenue model, it’s important to consider how much profit you generate from your average customer over the life of the relationship. As you scale, maintaining a healthy ratio of LTV to CAC—ideally 3:1 or higher—ensures that growth is both sustainable and profitable.
Revenue Recognition
Understanding revenue recognition principles and ensuring they align with accounting standards is another critical focus at this stage. Misaligned or inaccurate revenue recognition can lead to compliance issues and misrepresented financial performance. Properly recognizing revenue according to standards provides transparency and builds trust with investors, lenders, and potential buyers.
Cash Flow Management
Business owners often underestimate how complex cash flow forecasting is and how critically important it can be. A detailed cash flow forecast helps you plan for these needs and ensures you’re prepared to seize growth opportunities without overextending your resources. Securing access to financing or credit lines can also provide flexibility during periods of rapid growth.
Churn Rate
For businesses with recurring revenue, churn rate—the percentage of customers or revenue lost over a given period—becomes increasingly important. High churn can undermine growth efforts, while low churn strengthens profitability and boosts customer lifetime value. Monitor churn closely and develop strategies to retain customers and enhance their experience.
Align Metrics with Your Long-Term Goals
Scaling to $10 million is about scaling your revenue ten fold while building a sustainable and cost efficient foundation. Every number tells a story, and tracking the right ones will help you make better decisions. Enjoy the journey, get your 8 hours of sleep, and remember—you do you. And hey, maybe hire a good financial support team while you’re at it!
About the Author Susan Richards, Co-Founder and CEO of Numbercrunch, is passionate about empowering business owners to achieve their goals through sound financial practices. Numbercrunch is a financial services company that helps businesses scale more confidently.
