There is a common saying among those who have been in business for a long time.

"You can't just look at sales."

On the surface, a business may seem busy with many customers and growth, but there are surprisingly many that are running low on cash.

Conversely, there are companies that are not often in the news but are steadily growing due to solid internal numbers.

Stock prices and market capitalization are ultimately scores given by outsiders.

However, the numbers seen within the company are much more realistic. In short, it's a fitness check to see if "our business is truly healthy right now?"

"Is it a profitable business?"

The first thing to look at is, of course, money. But the key is not sales, but profit.

If you sell a million dollars a month but have nothing left over, it means nothing. That's why management looks at the operating profit margin.

It's about seeing how much is left after selling products, paying salaries, and covering operating costs.

What experienced business people prioritize first is this: how much and how consistently profit is generated.

Cash Flow = "Oxygen Supply"

There is something even more important than profit: operating cash flow.

This is an indicator of whether actual cash is coming into the bank, not just numbers on the books.

There are times when a company is profitable but still goes bankrupt, often due to cash shortages.

If there is a lot of money owed but the bank balance is low, salaries and payments to suppliers can get blocked.

There is a reason experienced entrepreneurs say, "Cash flow is the oxygen supply."

EBITDA, the True Strength of a Company

The name is complicated, but the meaning is simple. It measures how much cash a company actually generates.

This is especially important in manufacturing industries with significant investments in factories and equipment. It aims to show pure business strength, excluding accounting treatments like depreciation.

Are Customers "Coming Back?"

As important as money is the status of customers.

Even if sales are good now, if customers keep leaving, there is no future.

And retention! Are the customers who signed up this month still around next month? Subscription services like Netflix and YouTube Premium pay close attention to this. If there are many subscribers but they leave quickly, it's like pouring water into a bottomless pit.

Inventory turnover: This is an important metric in manufacturing and retail. If products sit in the warehouse for too long, that's money tied up. Successful companies have fast inventory turnover. If unsold inventory piles up, it eventually leads to discounts and losses.

Productivity per employee: This measures the revenue generated by each employee. If the number of employees increases but revenue does not follow, it signals inefficiencies within the organization. When U.S. tech companies decide to restructure, they ultimately look at this number.

Industry-Specific Key Metrics

Different industries prioritize different key metrics.

• SaaS: MRR / ARR — How stable is the subscription revenue coming in automatically each month?
• E-commerce platforms: GMV — The total transaction volume that occurs on the platform.
• Restaurants: Table turnover rate — How many times are customers served at the same table in a day?

In particular, the table turnover rate in restaurants is surprisingly a key factor in determining sales.

Ultimately, Two Things

The internal numbers of a business are much more honest than its outward appearance. Even if it looks glamorous on social media, if cash flow is broken, it's a warning sign. Conversely, if it appears quiet but retention and cash flow are stable, it is likely a much healthier company.

I believe there are two ways to quickly assess the state of a business.

1. Is cash consistently coming in?
2. Are customers coming back?

Ultimately, business is a cycle. If customers return, cash consistently remains, and operations are efficient, the company can last longer than expected.

Conversely, if sales are high but the company is weak, it can suddenly falter at any moment.