If you run a small business and someone asks you three finance questions, most of the time you should be able to answer them in under five seconds. If you can’t, your finance setup has a gap. Not a disaster — just the point where an accountant filing your year-end isn’t enough anymore.
After working with dozens of UK SMEs, these are the three I ask every new client on our first call.
How many months of cash have you got?
Not the balance in your bank today. Months of runway — meaning: if revenue stopped tomorrow, how long could you keep going before the business couldn’t meet its commitments.
The maths is simple:
Months of runway = cash in the bank ÷ monthly fixed costs
If you’ve got £40,000 in the bank and your monthly rent + salaries + software + unavoidable overhead runs to £10,000, you have four months of runway. If you don’t know this number, you can’t make confident decisions about hiring, stock, marketing spend — or almost anything else.
Most SMEs I meet think their answer to “how much cash do I have?” is the balance shown in their banking app. That’s today’s balance. Runway is the far more useful number.
What’s your gross margin — and is it the same for every customer?
Your accountant will tell you “your gross margin is 42%”. One number. Useful for the end-of-year accounts.
In reality, every SME has at least three gross margins hidden inside that headline figure:
- Margin by product or service line
- Margin by customer or customer segment
- Margin by channel or contract type
The mistake I see most often is that the founder’s single biggest customer — the one they’d panic about losing — is actually their worst margin. All the volume, none of the profit. Nobody had broken the numbers apart to see it.
You don’t need fancy software to see this. A spreadsheet where you allocate direct costs (the stuff that scales with delivery) to each customer or product reveals it in a weekend. Once you’ve seen it, pricing conversations, which clients you chase, and where your next hire goes all change.
What’s your true cost of a new hire?
This is the one that catches founders out most often. The salary on the job advert is not the cost of the hire.
A rough rule: true cost = base salary × 1.35 to 1.5, depending on the role.
For a £45,000 hire in the UK you’re looking at roughly:
- Employer’s National Insurance: ~13.8% above the threshold
- Pension contribution: minimum 3% employer auto-enrolment
- Equipment, software, desk, onboarding: £1,000–£3,000 first year
- Ramp-up period: typically 3–6 months where they’re not yet delivering at full productivity
Before you sign a job offer, the question isn’t “can I afford the salary?” — it’s “can I afford the true cost for six months while they ramp, and still stay above my cash-runway minimum?” That’s the model worth building before the hire, not after.
The point
None of this is complicated. It’s not proprietary. It’s not fintech. It’s basic commercial finance that your accountant isn’t set up to do because their job is compliance, not forecasting.
If you can answer all three of these in five seconds, you’re ahead of 80% of SME owners I meet. If you can’t, it’s worth an afternoon with someone who can build you the short models that surface these numbers automatically — so next time someone asks, you don’t need to think, you just know.
If you want the template I use for runway and cost-of-hire modelling, grab the free cash-flow template. It’s the same one I set up for new clients in week one.