- Understanding your profit margin helps you see how much revenue actually becomes profit and whether your pricing, costs, or product mix are working in your favour.
- Monitoring your cash runway shows how long your business can operate with current cash reserves and helps you plan for slower or seasonal periods.
- Keeping an eye on your operating expense ratio reveals how efficiently your business converts revenue into profit and highlights where overheads may be growing too fast.
January often brings a renewed sense of clarity – as well as rare breathing room as the pace of business eases. And what better time to review, reflect, and set the foundation for the year ahead?
When it comes to your business finances, there’s a lot you could look at, and it can be tricky to know exactly where to start.
Last year’s sales? Cash flow? Overheads? Or perhaps… all of the above? Before you get too overwhelmed and decide to skip the reflection exercise altogether, we’re here to help.
Here are 3 metrics worth reviewing early as you map out 2026:
Metric #1: Is your profit margin still working for you?
Your profit margin gives insight into how efficiently your business turns revenue into profit. It gives you a clear picture of whether your pricing, costs, or product mix are working in your favour.
A healthy margin gives you financial scope to invest in marketing, hiring, or growth without putting cash flow at risk.
And while a tight margin isn’t always a red flag, it is an early cue to rethink costs and pricing before small issues turn into big ones.
What to look for
- Signs that your margin is being squeezed – things like growing supplier costs and fluctuating material prices
- Whether pricing has (or hasn’t) kept pace with costs – are you charging enough to cover your expenses and make a profit?
- Any industry-specific margin pressures – like regulatory costs or seasonal demand swings
What to do if your profit margin is too tight
- Optimise your pricing strategy, for example, by implementing dynamic pricing or raising prices on popular products
- Encourage customers to buy more by upselling and/or cross-selling
- Review overheads and cut unnecessary expenses (you know, like those subscriptions no one ever really uses)
- Negotiate with your suppliers for better rates or bulk discounts
Metric #2: How long is your cash runway?
Many startups fail because they run out of cash. Not ideal.
That’s why keeping an eye on your cash runway is so important – it shows whether you have enough to cover expenses, invest in opportunities, or plan for slower periods before you actually hit a crunch.
A longer runway (say, several months) gives you breathing room to make long-term strategic decisions, like expanding into new markets or adding new products/services to your offering.
A short runway (say, a few weeks) isn’t necessarily a crisis, but it’s also not something to ignore. You know you don’t have a huge cash buffer, so you can course-correct before you actually do run out.
What does a healthy cash runway look like?
There isn’t really a specific number you should be after. What’s “healthy” depends on your business model, industry, and risk tolerance.
For instance, startups may operate on shorter runways, while established businesses usually aim for more flexibility.
Seasonality is another factor. If your cash flow spikes and dips throughout the year, a “healthy” runway may need to cover lean periods, not just the average month.
For example, for hospitality businesses, summer is often a busier time. Winter, on the other hand, can have very low cash inflow. Bottom line? You need to plan your cash runway to cover slower months without stress.
What to do if your cash runway is getting too short
- Slash non-essential spending like travel or low-ROI marketing
- Speed up receivables by following up on unpaid invoices (promptly) or offering early payment discounts
- Increase revenue, for example, by upselling/cross-selling or strategically raising prices
- Consider business finance solutions like a line of credit or short-term loan
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Metric #3: Are your operating expenses creeping up?
Knowing your OER reveals how well you control the costs of running your business versus the income you generate.
With a lower OER, you have a larger portion of revenue you can retain as profit or reinvest in growth initiatives. On the flip side of the coin, a higher OER leaves you with less money leftover, and as a result, less financial leeway.
Red flags to watch for
- A ratio that’s increasing steadily over time
- A ratio that is significantly above the benchmarks in your industry
- Operating costs that grow faster than sales, shrinking your margins
What to do if your operating expenses are too high
- Cut unnecessary costs (starting to see a pattern here?)
- Review your workflows and look for opportunities to eliminate duplicate effort and wasted time
- Outsource where possible – are any non-core tasks you can hand over to a third party?
- Improve your stock management strategy and make sure you’re not over-ordering or over-producing
How Valiant can help you start 2026 on the front foot
When it comes to business finance, the goal is to be profitable and have enough cash flow to pay for day-to-day expenses, jump on opportunities, and weather unexpected costs.
But the reality is, you won’t always have that kind of flexibility or buffer. And that’s exactly where Valiant comes in.
Our platform compares loans from over 90 lenders to connect you with ones that work with your specific needs.
We manage the paperwork, handle the application, and help get your funding sorted, so you can focus on running your business without the stress. Get a quote today and kick off 2026 with confidence.
