Know your numbers.
Know what they mean.

Where it breaks. Comparing ARR growth to revenue growth and calling it the same number. Pick one, label it, use it consistently in every document.

Worth knowing. Private B2B SaaS median: 22% (SaaS Capital, CY-2025). Bootstrapped 20%, equity-backed 25%.

Sources. SaaS Capital: private B2B SaaS company growth-rate benchmarks

Where it breaks. CAGR hides a bad most-recent year. If last year was flat, the buyer will find it: show the year-by-year alongside.

Worth knowing. Use for 3+ year histories. Below 3 years, show the actual years: CAGR on two points is theater.

Where it breaks. This is where the accrual trap lives. A 12-month prepay is 1/12 of that cash per month: booking it as one month of revenue inflates ARR and is caught in the first hour of diligence.

Worth knowing. Count only committed, recurring contracts. Exclude one-time fees, services, and usage overage above committed minimums.

Where it breaks. Netting expansion against churn. They are different diagnoses: expansion masking heavy churn is a leaky bucket priced as a growth story.

Worth knowing. A bridge, usually drawn as a waterfall chart, reconciles opening ARR to closing ARR one movement at a time: add new and expansion, subtract contraction and churn. Four components, always. If you can only produce net growth, that itself is the finding.

Where it breaks. Including new logos in the cohort. The cohort is frozen at day one; only what happened to those customers counts.

Worth knowing. Bootstrapped $3–20M ARR median 103% (SaaS Capital 2026). Across ChartMogul’s broader B2B SaaS base (companies with $250K+ ARR), the 2025 median was 82%; B2C ran 49%.

Sources. SaaS Capital research: private B2B SaaS retention benchmarks · ChartMogul SaaS retention report, 2025

Where it breaks. Leading with NRR and never showing GRR. A sophisticated investor asks for GRR specifically because it's the number you can't dress up.

Worth knowing. Median 84%, down from 88% (Benchmarkit/Aleph, CY-2025). Enterprise 91%, sub-$5K ACV 80%.

Sources. Aleph × Benchmarkit: gross revenue retention, CY-2025

Where it breaks. Measuring monthly and multiplying by 12, or dividing a year's churn by 12 and compounding it back up. Churn compounds: convert with 1 − (1 − period churn)^(12 ÷ months), which assumes the same rate every month.

Worth knowing. Logo churn runs higher than revenue churn: small accounts leave first. Enterprise logo churn runs in single digits a year; small-ACV accounts churn far faster. Rule of thumb, not survey data. This counts only customers you had at the start of the period: customers who joined and left inside it are left out, so measure every period the same way.

Where it breaks. Thinking this only costs you multiple. It more often costs you deal structure: a large share of the price pushed into an earnout tied to that customer staying.

Worth knowing. Above 20%, buyers discount the concentrated slice of EBITDA separately at a lower multiple and blend. Above 30%, expect earnout and escrow, not just a lower price. Deal convention, not published data.

Where it breaks. Calling repeat customers 'recurring.' Recurring means contracted. A customer who happens to reorder is repeat revenue: a real asset, but it prices differently.

Worth knowing. Contracted and recurring is worth multiples of project or one-time revenue at the same dollar amount.

Where it breaks. Treating a healthy cash balance as profit when it is over-billing: customer money for work you have not performed. Contractors spend it and hit the back half of the job with no funding. The mirror error is never updating estimated cost at completion, which hides job fade until it is unrecoverable.

Worth knowing. GAAP percentage-of-completion applied operationally. Surety underwriters conventionally treat aggregate under-billings above about 1% of annual revenue, or any single job under-billed by more than 10% of contract value, as a red flag. Underwriting convention, not published data.

Where it breaks. Hosting, direct labor, support, and delivery software belong in COGS, not OpEx. Moving them up inflates gross margin and is the first thing a diligence team re-maps.

Worth knowing. SaaS software median 80%, blended 76% (CY-2025). Usage-based pricing 62%. Services and retail run far lower, roughly 30–35% (rule of thumb, not survey data).

Sources. Aleph × Benchmarkit: SaaS gross margin, CY-2025

Where it breaks. Treating gross margin and contribution margin as synonyms. Contribution margin also strips variable selling costs: commissions, payment processing, shipping.

Worth knowing. Run it per product, per channel, per customer segment. The blended number hides the loser.

Where it breaks. Adding back depreciation in a capex-heavy business as if it were free. If equipment genuinely must be replaced, sophisticated buyers deduct maintenance capex right back out.

Worth knowing. SBA underwriting starts from EBITDA and lets the lender adjust it for items it can justify: unfinanced capital spending, owner draws and distributions, distributions for S-corp owners' taxes. Your borrowing capacity is built on that adjusted figure, not on raw EBITDA.

Where it breaks. Building an add-back schedule you can't source. A quality-of-earnings review tests each line: undocumented add-backs don't get negotiated down, they get removed.

Worth knowing. Every add-back needs a document behind it. Standard: one-time legal, flood/disaster, above-market related-party rent. Contested: travel, meals, family payroll, club dues.

Where it breaks. The most expensive mistake on this page. See The SDE / EBITDA Multiple Trap. SDE and EBITDA multiples are not interchangeable.

Worth knowing. Convention switches on enterprise value, not revenue: under ~$2M EV use SDE; $2–3M EV is the transition zone where both appear; $3M+ EV use EBITDA. Brokers follow this split in their own reporting.

Where it breaks. Presenting net margin to a lender who is underwriting to EBITDA, or to an investor who is underwriting to operating leverage. Know which audience wants which line.

Worth knowing. Operating margin is the cleaner comparison across companies; net margin is distorted by capital structure and tax posture.

Where it breaks. Using gross margin instead of contribution margin, which understates the break-even point and makes the plan look safer than it is.

Worth knowing. Recalculate after every material hire or lease. It moves more than people expect.

Where it breaks. Payroll landing in one undifferentiated bucket. Until people are mapped to departments, no forecast built on this is defensible.

Worth knowing. Typical SaaS mix: S&M ~37%, R&D ~34%, G&A ~24% of revenue. Rule of thumb, not survey data. These are separate figures: they are not a budget, and they do not sum to a viable cost structure for a bootstrapped company.

Where it breaks. Starving real infrastructure to move this ratio. Underpaying finance and technology to look efficient is the overhead myth, and it shows up two years later as a failed audit or a lost grant. The ratio measures allocation, not effectiveness.

Worth knowing. BBB Wise Giving Alliance Standard 8 requires at least 65% of total expenses on program activities. Charity Navigator’s Accountability & Finance score also rewards higher program spending. Both read the figure off the Form 990 functional expense statement, so the allocation you book is the allocation you are judged on.

Watch. Whether your allocation method between program, management and fundraising is documented and applied consistently. An auditor will ask.

Sources. BBB Wise Giving Alliance standards · Charity Navigator methodology

Where it breaks. Counting only the bookkeeper's invoice. Software, the CPA's tax and cleanup work, the payroll provider and your own hours all belong in the number, and your own time is usually the largest line left out of it.

Worth knowing. APQC's open-standards measure 103539 (total cost to perform the finance function per $1,000 of revenue) puts the median at $7.92 across 11,343 organizations, or 0.79% of revenue. Compare against your own prior years before comparing against the median.

Sources. APQC measure 103539

Where it breaks. Excluding salaries and loaded comp: counting only ad spend. Fully-loaded CAC includes the people, their benefits, and the tools.

Worth knowing. Blended CAC ratio median: $1.30 of S&M per $1 of new ARR (Aleph × Benchmarkit, CY-2025); new-customer-only ratios run higher. There is no cross-industry CAC benchmark: a home-services business and a software business have nothing comparable here, so track your own trend and compare only within your industry.

Sources. Aleph × Benchmarkit, CY-2025

Where it breaks. Omitting gross margin. Paying back on revenue rather than gross profit understates payback by roughly a quarter.

Worth knowing. Median 16 months, top quartile ≤6 (Aleph/Benchmarkit, CY-2025). SMB ACV ~11 months; enterprise ~22. Both terms must be per-customer or both aggregate: mixing them yields a meaningless number. Tiers are at-scale norms; read them against your ACV segment, not instead of it.

Sources. Aleph × Benchmarkit: CAC payback, CY-2025

Where it breaks. Using revenue instead of gross profit, and a churn rate borrowed from a benchmark rather than your own cohorts. Both inflate LTV, and they compound.

Worth knowing. ARPA and churn must be on the same period: monthly with monthly, annual with annual. Use revenue churn, not logo churn. Only meaningful with real churn history; below ~18 months it is a projection, not a measurement. If NRR exceeds 100% the formula breaks down entirely.

Where it breaks. Leading with LTV:CAC in a pitch. Sophisticated investors discount it precisely because both inputs are assumption-heavy: lead with CAC payback instead.

Worth knowing. A rule of thumb, not benchmark data: the 3:1 convention comes from a survey panel. Above 5× may signal underinvestment in growth.

Where it breaks. Running it on a single quarter. It's noisy: use a trailing four-quarter view before drawing a conclusion.

Worth knowing. Median 1.37 (CY-2025), up from 0.94, first time above 1.0 in four years. 75th percentile 2.14.

Sources. Aleph × Benchmarkit: magic number, CY-2025

Where it breaks. Using gross burn. The multiple is defined on net burn: gross overstates it and makes an efficient company look wasteful.

Worth knowing. Tiers are David Sacks / Craft Ventures: <1× amazing, 1–1.5× great, 1.5–2× good, 2–3× suspect, >3× bad. These are at-scale norms: early stage naturally runs higher and falls with scale (rule of thumb, not survey data). Read the tiers against your stage, not instead of it.

Where it breaks. Mixing an ARR growth rate with a GAAP EBITDA margin. Both terms must come from the same basis, or the score is meaningless.

Worth knowing. Median 25% (CY-2025): more than half the market is below the line. Top quartile 43%+. Only becomes meaningful around $20M ARR; below that it's volatile.

Sources. Aleph × Benchmarkit: Rule of 40, CY-2025

Where it breaks. Counting contractors inconsistently between periods, which manufactures a trend that isn't there.

Worth knowing. Private SaaS median $141K ARR/FTE (SaaS Capital 2026); $1–3M ARR ~$110K, bootstrapped higher at every band. Those figures are software-only. For a business that resells materials or subcontracts, revenue per employee flatters badly: use Labor Efficiency Ratio instead, which measures gross profit per labor dollar.

Sources. SaaS Capital research: private B2B SaaS benchmarks

Where it breaks. Forecasting headcount at base salary. Across ten hires that understates burn by roughly three extra salaries.

Worth knowing. Typically 1.25–1.4× base salary, a long-standing rule of thumb. Run it before the offer, not after the first payroll.

Sources. Hadzima, MIT: what an employee really costs

Where it breaks. Judging a new donor-acquisition program on first-year cost. Acquisition is bought at a loss and repaid over the donor's lifetime; measuring year one alone kills the programs that would have funded you in year five.

Worth knowing. BBB Wise Giving Alliance Standard 9 sets the ceiling at 35 cents per dollar of related contributions. Channels differ enormously underneath any blended figure: a major-gift program and a cold direct-mail acquisition campaign are not comparable, and averaging them hides both.

Watch. Cost per channel, not blended. And whether the denominator includes the grants you would have received anyway.

Sources. BBB Wise Giving Alliance standards

Where it breaks. Quoting gross when asked for net, or averaging a quarter that included an annual prepay. Show the monthly series.

Worth knowing. Compute from the bank, not the P&L. Burn is a cash concept.

Read it with cost of sales split out. For a contractor, distributor or restaurant, most of gross burn is variable and falls with revenue. The number that doesn't fall is fixed cost, and within it, committed cost. That's your real exposure. More in the Note →

Where it breaks. Ignoring committed but unspent obligations: signed leases, annual software renewals, severance. Real runway is shorter than the arithmetic.

Worth knowing. Use a trailing 3-month average burn, and state whether the figure is before or after any planned raise. If you are cash-flow positive, report it as not applicable rather than as a negative number.

Where it breaks. Presenting EBITDA as if it were cash. In a working-capital-hungry or capex-heavy business the two diverge sharply.

Worth knowing. The gap between EBITDA and FCF is where working capital and capex intensity show up. Buyers look at both.

Where it breaks. Averaging DSO across a book with one very large slow payer. Look at the aging, not just the average.

Worth knowing. Small business target 15–30 days. Rule of thumb, not survey data. The AR triage red flag (items over 60 days) lives here.

Where it breaks. Stretching DPO right before a sale. The working capital peg is built on your normal behavior, so you hand the benefit straight back at close.

Worth knowing. Read alongside DSO. Paying in 20 while collecting in 50 is a self-inflicted cash squeeze.

Where it breaks. Carrying obsolete inventory at cost. It inflates the inventory figure, which lowers calculated turns and raises days on hand, and it overstates the balance sheet until diligence writes it down. And using period-end inventory instead of the average: a year-end build or clear-out swings the result.

Worth knowing. Highly industry-specific. Track your own trend before comparing to anyone else's.

Where it breaks. Benchmarking against public-company data. SMB working capital is structurally worse: weaker collections and less supplier leverage. Use it for shape, not as a target.

Worth knowing. Software runs near zero or negative; distribution 35–65; manufacturing 50–90; construction 60–120. Rule of thumb, not survey data.

Where it breaks. Counting undrawn credit line availability as a current asset. It isn't one, and the drawn balance is a current liability.

Worth knowing. Lenders treat 1.0 as the floor; 1.5+ reads as comfortable.

Where it breaks. Including receivables over 90 days. If they're not collectible this quarter they don't belong in a liquidity test.

Worth knowing. Lenders want ≥1.0. The gap between your current and quick ratio is the size of your inventory bet.

Where it breaks. Using average inventory at retail rather than at cost in the denominator. That deflates GMROI by roughly your margin percentage and makes every category look like a failure. Second: a single point-in-time inventory figure instead of a twelve-month average, which wrecks the number for any seasonal retailer.

Worth knowing. $2.00 is the common healthy floor but it is heavily category-dependent. Retail Owners Institute five-year averages: apparel $1.50–$3.00 · specialty $3.00–$15.00 · furniture $2.00–$4.42 · consumer electronics $5.00+ (appliances $2.30) · health and beauty $2.85–$6.67 · motor vehicles $0.59–$3.19. Directional: the underlying data is undated.

Sources. Retail Owners Institute: GMROI

Where it breaks. Counting only warehouse rent. The capital cost, what that money would otherwise earn, or what your line of credit charges, is usually the largest single component and is almost always omitted, which makes over-stocking look free. At a 25% carrying cost, $200K of excess inventory costs you $50K a year.

Worth knowing. Carrying costs commonly run 20–30% of average inventory value per year. Rule of thumb, not survey data. Retail shrink runs 1.4–1.6% of sales per the NRF/LPRC National Retail Security Survey: note the most-cited figure is 2022 data published in 2023.

Sources. NRF National Retail Security Survey

Where it breaks. Counting donor-restricted money, or reading the unrestricted net assets line off the balance sheet and calling it a reserve. A building sits in that line too, and it cannot make payroll.

Worth knowing. Available liquid operating reserves are cash and investments you could turn into cash quickly, without donor restrictions, minus money the board has set aside for another purpose and minus bills already owed. They are not the same as net assets without donor restrictions (formerly 'unrestricted net assets'), which also include buildings, equipment and receivables that cannot make payroll. A board-designated operating reserve counts; board designations for a building or an endowment do not, unless the board releases them. Divide by cash operating expenses, total expenses minus depreciation and in-kind contributions, for the same twelve months. The Nonprofit Operating Reserves Initiative (2008) set a minimum of three months (25% of annual expenses); the National Council of Nonprofits notes there is no single universal standard.

Watch. Whether the board has adopted a written reserve policy naming a target and the conditions for drawing on it. Without one, the reserve gets spent by default rather than by decision.

Sources. National Council of Nonprofits: operating reserves (why no single standard applies)

Where it breaks. Deducting the same dollar twice. If your own pay already runs through payroll, it is already out of EBITDA: deduct only distributions on top of it. Interest belongs in the debt payments, not in the adjustments. And leaving the proposed loan out of the denominator: you are showing you can carry the loan you do not have yet.

Worth knowing. SBA starts from EBITDA and lets the lender adjust it for items it can justify, unfinanced capital spending, owner draws and distributions, distributions to cover S-corp owners' taxes, non-recurring income, then divides by payments on all business debt, including the new SBA loan (SOP 50 10 8.1). Minimums: 7(a) Small Loans of $350,000 or less need at least 1.10:1 on a historical or projected basis (SBA Procedural Notice 5000-876777, effective Mar 1, 2026); standard 7(a) loans need at least 1.15:1, plus 1:1 on a global basis. Conventional banks commonly look for 1.20–1.25×. Meeting a minimum makes a loan eligible to be considered, not approved: credit, collateral, equity injection and management are underwritten too.

Watch. SOP 50 10 8.1 with Technical Policy Updates applies to applications received by SBA on or after October 1, 2026. SBA lenders must continue using SOP 50 10 8 for applications submitted through September 30, 2026 (SBA Information Notice 5000-882227, published September 25, 2026). For changes of ownership it sets a 1.25:1 minimum for initial acquisitions, owner buyouts and ESOP deals and 1.15:1 for business expansions, and the minimum has to be supported by historical earnings: projections may be considered but can't be used to meet it. The same technical updates let 7(a) Small and Express loans finance changes of ownership under those same coverage requirements. 504 requirements are not summarized here; ask your CDC. Ask your lender which version applies to your application.

Sources. SBA: SOP 50 10, current version and technical updates; SBA Information Notice 5000-882227, September 25, 2026: SOP 50 10 8.1 Technical Policy Updates, for applications received by SBA on or after October 1, 2026

Where it breaks. Preparing the business file and ignoring the personal one. A clean company with a stretched personal balance sheet still gets declined.

Worth knowing. SBA requires global coverage of at least 1:1 on standard 7(a) loans (SOP 50 10 8.1); most lenders want 1.25×+. Income side includes owner and spouse W-2, net rental, dividends. Debt side includes personal mortgage, autos, student loans, card minimums, support obligations: verified against credit reports and three years of personal returns.

Watch. Owner-compensation add-backs now face a global cash flow test: the salary you claim you can live on must reconcile to your documented personal expenses. Aggressive comp add-backs now fail twice.

Sources. SBA: SOP 50 10, current version and technical updates

Where it breaks. Reading the number and not the definition. Owner distributions are often pulled into 'fixed charges' by the credit agreement: check the contract language, not the ratio.

Worth knowing. Typical covenant 1.0–1.25×. Definitions vary by credit agreement: leases, preferred dividends and insurance premiums are often pulled in. Whatever sits in the denominator must be added back in the numerator, or you penalize the same dollar twice.

Where it breaks. Relying on it for amortizing term debt, where DSCR and FCCR dominate because they include principal.

Worth knowing. Covenant floors commonly set at 2.0×. Below 1.5× reads as distress.

Where it breaks. Excluding capital leases and seller notes. Lenders include them; your internal number should too.

Worth knowing. Below 3.0× reads as healthy for SMB bank lending. Above ~3.5×, conventional lenders generally want sponsor equity or subordinated debt. This is strong convention rather than a published rule.

Where it breaks. A negative equity balance from years of distributions exceeding earnings. Common, fixable, and much better explained by you than discovered by them.

Worth knowing. Above 2.0 reads as higher risk in SBA lender guidance, though lenders tolerate more of it in a startup or a business in a growth phase. Debt-to-net-worth below 1.0 reads as stable. With negative equity the ratio is meaningless: report the equity deficit itself, not the ratio.

Where it breaks. Borrowing a multiple from the wrong dataset. PE-sponsored deals ≥$10M run 6.4×+: applying that to a $2M-EBITDA business is the classic and most expensive error on this page.

Worth knowing. Broker-intermediated deals (IBBA Q1 2026): <$500K → 2.0× SDE · $500K–1M → 2.8× SDE · $1–2M → 3.3× SDE · $2–5M → 4.0× EBITDA · $5–50M → 4.5× EBITDA. BizBuySell Q1 2026, 2,345 closed deals: 2.7× SDE, median price $350K.

Sources. IBBA Market Pulse, Q1 2026 · BizBuySell Insight Report, Q1 2026

Where it breaks. Planning your life around enterprise value. Illustrative: a '$30M deal' can become $20M cash at close, a $5M earnout, $3M in escrow and a $2M seller note.

Worth knowing. Deals are structured cash-free, debt-free. Then subtract escrow, holdback, earnout, and seller note to get cash at close.

Where it breaks. Reaching for a revenue multiple because the EBITDA multiple is unflattering. Buyers notice, and it signals the earnings won't survive scrutiny.

Worth knowing. SMB five-year average ~0.67× revenue. Used seriously only for high-growth recurring-revenue businesses.

Sources. BizBuySell valuation multiples, Q3 2021–Q2 2026

Where it breaks. Anchoring on the larger multiple. Ask any advisor quoting a multiple: 'of SDE, or of EBITDA?'

Worth knowing. Worked example: $1M SDE with $250K owner comp = $750K EBITDA. 3× SDE = $3M. 4× EBITDA = $3M. Same price. The EBITDA multiple only looks higher because the base is smaller.

Watch. Applying an EBITDA multiple you read online to your SDE overvalues the business by roughly a third. Always confirm which base a quoted multiple refers to before you anchor on a number.

Where it breaks. Sprinting to collect AR and stretch AP before close. The peg is built from your own historicals, so you deliver below a normal-behavior target and pay the difference back: an adjustment that often surprises sellers.

Worth knowing. Usually set as a trailing 12-month average of monthly NWC. Collars of ±5–10% create a no-adjustment zone. Final true-up lands 60–90 days after close.

Sources. SRS Acquiom Working Capital study, 2026

Where it breaks. Computing ownership on issued shares rather than fully-diluted. Options, warrants, and SAFEs all convert.

Worth knowing. If the pool is created pre-money, the existing shareholders fund it alone: an effective additional dilution the headline valuation hides.

Where it breaks. Assuming a headline valuation translates proportionally to founder proceeds. With a preference stack, a mid-range exit can return far less to common than the ownership percentage implies.

Worth knowing. Run the waterfall at several exit values before signing, not after receiving an offer. Participating preferred and stacked preferences change the answer sharply at lower exit prices.

Where it breaks. Revising the budget to match the actuals. That erases the only signal the exercise produces.

Worth knowing. Run it monthly by department. The pattern of variance matters more than any single month.

Where it breaks. Never scoring yourself. Investors who fund you will build this record whether or not you do.

Worth knowing. Keep a rolling record of prior forecasts versus outcomes. A modest projection you consistently hit outweighs an ambitious one you consistently miss. Bounded above at 100% but not below: a forecast double the actual scores 0%, triple scores −100%, and undefined when actual is zero. Use it on revenue lines, not on items that can hit zero.

Where it breaks. Timing the accountant's working days instead of elapsed days. Both statements can be true: the close takes a week and you don't see the numbers until the 23rd. Only the second one decides whether you can still act on the month.

Worth knowing. APQC's open-standards measure 104615 (cycle time in days to complete the monthly financial close) puts the median at 8.0 days across 3,389 organizations. APQC's public listing does not state whether those are calendar or business days, and it times the accounting work rather than the owner's wait. The bands here are Countabl's, set on the owner's definition: month-end to numbers in hand.

Sources. APQC measure 104615 (accessed October 2026)

Where it breaks. Modeling monthly. Payroll on the 15th against a receivable landing on the 28th is invisible at monthly resolution and fatal in practice. The second mistake is modeling an average week: real outflows are lumpy, and the low point is what matters, not the closing balance.

Worth knowing. Built from AR aging, AP aging, payroll dates and debt service. Roll it forward every week. The point of weekly resolution is that payroll and collections land on different days: the average week can look fine while a specific week does not.

Where it breaks. Meeting your first QoE as the seller. Running a sell-side quality of earnings before going to market means you find the adjustments while you can still fix them.

Worth knowing. Under SOP 50 10 8.1 with Technical Policy Updates, which applies to applications received by SBA on or after October 1, 2026 (SBA Information Notice 5000-882227), initial acquisitions and business expansions with a purchase price of $3M or more need a quality of earnings report prepared for the lender's benefit, not by or for the seller. A buyer-commissioned report counts only if one of the lender's approved vendors reviews it. Confirm current requirements with your lender before relying on this.

Sources. SBA Information Notice 5000-882227, September 25, 2026: SOP 50 10 8.1 Technical Policy Updates, for applications received by SBA on or after October 1, 2026

Where it breaks. Adding a 30% markup and believing you earned a 30% margin. You earned 23.1%. On $1M of revenue that is a $69,000 hole you will look for in the wrong place all year.

Worth knowing. Target-margin → markup: 30% margin needs a 1.43× multiplier · 40% needs 1.67× · 50% needs 2.00× (keystone). Convention, not survey data: the arithmetic is exact.

Where it breaks. Testing the discount against gross margin instead of contribution margin: it makes the required volume lift look smaller than it is. And assuming the discount only reaches new buyers; it reaches everyone who would have paid full price.

Worth knowing. At a 30% contribution margin a 10% discount requires 50% more volume just to stand still, and the margin on the new, lower price is 22.2% (20 cents on a 90-cent sale). At 40% CM a 10% price rise lets you lose 20% of volume and come out level. A discount as large as the contribution margin leaves nothing per sale, and no volume can make that up. Method per Nagle & Müller, The Strategy and Tactics of Pricing.

Where it breaks. Counting labor twice: kitchen wages left inside COGS and counted again as labor, or leaving payroll taxes, workers' comp and benefits out of labor. The first overstates prime cost; the second understates it by several points. And running it monthly: weekly is what lets you act on it.

Worth knowing. Food and beverage cost means ingredients and drinks only: no wages. Labor means every wage and salary, front and back of house and managers, plus payroll taxes, benefits and workers' comp, counted once. If your books put kitchen labor inside cost of goods sold, take it out of the first figure; it belongs only in the second. National Restaurant Association, 2025 Restaurant Operations Data Abstract (August 2025, 900+ restaurants, 2024 data): limited-service operators spend a median 65 cents of every sales dollar on food, beverage and labor combined, and full-service payroll and benefits run a median 36.5% of sales. The 60–65% target most operators use is a rule of thumb, not survey data.

Sources. National Restaurant Association: operations report release, Aug 20, 2025 (U.S. restaurant operators)

Where it breaks. Expressing variance as a percentage of COGS instead of sales: that inflates it roughly threefold and makes the published bands useless. Second: counting inventory on a different day each period, which manufactures variance that isn't there.

Worth knowing. Under 2% is well controlled · 2–3% acceptable · 3–5% needs work · above 5% investigate now. Practitioner convention, consistent across restaurant-tech sources; no published dataset.

Where it breaks. Ranking by margin percentage instead of contribution dollars. A $4 coffee at 85% contributes $3.40; a $28 entrée at 65% contributes $18.20. Percentage-ranking tells you to push the coffee and cut the entrée, which is how a business engineers itself into insolvency.

Worth knowing. Kasavana & Smith menu-engineering convention (1982), still the practitioner default: an item is 'popular' above (1 ÷ number of items) × 0.70 of total units. Star = high margin and high volume · Plowhorse = low margin, high volume · Puzzle = high margin, low volume · Dog = neither.

Where it breaks. Using revenue instead of gross profit. Revenue per employee flatters any business that passes through materials or subcontractors: a contractor at $3M revenue with $1.8M of materials looks efficient and is drowning. Second: leaving the owner's labor out. If the owner works sixty hours and takes distributions, this number is fiction.

Worth knowing. Greg Crabtree (Simple Numbers, Straight Talk, Big Profits, 2011) popularized it and deliberately declines to publish a universal target; he benchmarks against your own rolling 12-month trend. The repeated working targets of 2.0× direct and 4.0× management are practitioner convention with no dataset behind them: treat them as a starting point, not a standard.

Where it breaks. Dividing by 2,080 hours. The denominator has to be productive hours: take out PTO, holidays, training, travel and shop time. A tech paid for 2,080 who bills 1,400 costs roughly 48% more per billable hour than the 2,080 figure suggests. This one error underprices a lot of trade work.

Worth knowing. BLS Employer Costs for Employee Compensation, June 2026 (released September 9, 2026), private industry, per hour worked: wages and salaries $32.82, benefits $14.07, total compensation $46.89. Measured the way this calculator measures it (added cost divided by wages), that is a 42.9% load, a 1.43× multiplier. BLS headlines the same benefits as 30.0% of total compensation; that is a different denominator, not a different cost. BLS benefits include paid leave, which this calculator handles through productive hours instead, so a like-for-like load here usually lands below 42.9%. Employer FICA is 7.65% up to the $184,500 Social Security wage base (SSA, 2026).

Sources. BLS: Employer Costs for Employee Compensation, June 2026 (private industry, per hour worked); SSA: 2026 Social Security wage base

Where it breaks. Recovering overhead across available hours rather than historically achieved billable hours. Spread overhead over 2,080 and sell 1,400, and you under-recover a third of your overhead every year while wondering why a 30%-gross-margin business has no profit.

Worth knowing. Method is practitioner convention. ServiceTitan's worked example: 5 techs × 583 billable hours = 2,916 hours; $81,648 burdened labor + $100,000 overhead ÷ 2,916 = $62.29 break-even per sold hour. Note that implies about 28% billable utilization against 2,080 available hours: realistic for residential service, and a useful shock.

Where it breaks. Measuring utilization and never realization. A shop at 80% utilization and 70% realization is worse off than one at 70% and 95%. Owners chase the visible number and bleed on the invisible one: scope creep, write-offs and courtesy discounts.

Worth knowing. Billable utilization fell to 66.4% in 2025, the lowest in the survey's history, against an optimal threshold near 75%; project margin 37.7%; revenue per billable consultant $210K, up 6% year over year. SPI / Deltek 2026 Professional Services Maturity Benchmark.

Sources. SPI / Deltek Professional Services Maturity Benchmark

Where it breaks. Averaging across the whole week. A restaurant at 45% average seat utilization may be at 95% Friday and Saturday and 20% Monday to Wednesday. The average says add capacity; the daypart says change your Tuesday pricing. Run this by day or daypart or it will actively mislead you.

Worth knowing. Capacity units are seat-hours, chair-hours, room-nights, bay-hours, class slots or truck-days. RevPASH originates in Sheryl Kimes' Cornell revenue-management work; the generalization to gyms, salons, clinics and trades is convention. Restaurant table-turn convention: 1.5–2 turns for casual dining at dinner, 3+ for fast casual.

Where it breaks. Comparing base rent only. CAM, triple-net taxes and insurance routinely add 25–40% on top, and percentage-rent clauses add more as you grow. Owners sign to a 7% base rent and operate at a 10% all-in occupancy cost.

Worth knowing. Retail convention targets base rent at 5–10% of gross annual sales, with the full range across business types running 2–20%; restaurants 6–10%, salons 8–12%, professional services tolerate up to ~15%. These are broker convention, not survey data: the commercial-real-estate sources that publish the formula decline to publish healthy ranges.

Where it breaks. Counting only the job ad and the recruiter fee, usually under a fifth of the real cost. The dominant components are vacancy coverage (overtime at 1.5×, or revenue simply not earned) and the ramp period. A restaurant replacing a line cook counts a $200 ad and ignores six weeks of a slower kitchen.

Worth knowing. The most-cited study (Center for American Progress, 2012) put typical replacement cost near 20% of salary, ranging from 16% for lower-paid roles to over 200% for executives. It is not a current, primary benchmark. This calculator builds the number from your own components instead, which is both more defensible and more useful. Use it only as a sanity check on the result.

Sources. Center for American Progress, 2012

Where it breaks. Using the base hourly rate as the FLSA 'regular rate'. If you pay a nondiscretionary bonus or a shift differential and compute overtime on base pay alone, you have underpaid: a frequent trigger for wage-and-hour claims, and back pay is doubled as liquidated damages. Separately: treating a high share of a hire's year as proof that hiring pays. Filling most of a year is a capacity fact, not a cost result: compare the dollars for the same work first.

Worth knowing. Overtime carries only variable burden: FICA, workers' comp, SUTA under the state base. Health premiums and most fixed benefits do not scale with hours, which is why overtime is usually cheaper per hour than it looks. A hire brings a whole year of capacity; this calculator shows how much of it the current overtime would fill, and leaves the judgment about the rest to you.

Watch. The 2026 'no tax on overtime' deduction ($12,500 single / $25,000 MFJ, phasing out from $150K/$300K MAGI, tax years 2025–2028) is an employee income-tax deduction on the premium half only. It does not reduce employer FICA, FUTA, SUTA or workers' comp: overtime did not get cheaper for the business, and employers picked up a new reporting burden. Cost is not the only question either: overtime this sustained carries fatigue, error and turnover risk that the dollar comparison doesn't price, and spare hours from a hire are only worth something if there is work to put in them.

Where it breaks. Comparing a stated rate to an APR, and assuming a '10% loan' costs 10% of principal in total interest. On a fully amortizing loan the average balance is about half the principal, so a five-year 10% loan costs roughly 27% of principal in total, not 50%. Owners optimize the monthly payment and buy more total interest.

Worth knowing. Bank prime was 7.00% at September 30, 2026 (Federal Reserve H.15). SBA 7(a) Working Capital Pilot caps run base rate +6.5% on loans ≤$50K down to +3.0% above $350K: roughly a 10.0–13.5% band at that prime, which is the right yardstick for anything else you are offered.

Sources. Federal Reserve H.15 · SBA 7(a) loans

Where it breaks. Reading '1.3 factor' as '30% interest'. It is about 30% of face over a period in which you hold, on average, roughly half the money. Even the standard cost ÷ advance × 365 ÷ days formula that most calculators use materially understates the APR, because it treats the whole principal as outstanding for the whole term while remittances retire it continuously.

Worth knowing. Factor rates commonly run 1.1 to 1.5. Rule of thumb, not survey data. The Fed's 2026 Small Business Credit Survey (published March 3, 2026) found 60% of firms borrowing from online lenders said actual costs were higher than expected, against 37% at small banks and 32% at large banks: online fintech share of applicants rose from 17% in 2020 to 29% in 2025.

Watch. This is an estimate. It assumes equal payments at even intervals (weekly, or every business day), starting one period after funding, and annualizes the periodic rate by simple multiplication, the way a loan APR is quoted. Holdbacks that move with sales, skipped days and holidays change the real stream, so use the contract's own schedule for an exact figure. Shorter terms make an advance more expensive, not less: the same 1.35 factor is roughly 70% APR over twelve months and well over 100% over six. If you are offered a renewal, check whether the payoff of the existing advance includes the unearned portion of the original factor.

Sources. Federal Reserve Banks: 2026 Small Business Credit Survey, report on employer firms (survey of U.S. firms with employees)

Where it breaks. Two. 'It's only 2%': it is 37% annualized. And paying on day eighteen: you have paid the full price and captured none of the float. Either pay on day ten or ride to day thirty; there is no partial credit.

Worth knowing. 2/10 net 30 is 37.2% annualized (44.6% compounded). Others: 1/10 net 30 = 18.4% · 2/10 net 45 = 21.3% · 3/10 net 30 = 56.4%. With bank prime at 6.75% and a line of credit near 10%, borrowing to take 2/10 net 30 is almost always correct.

Where it breaks. Comparing headline rates instead of computing the effective rate off an actual statement. Flat-rate pricing is dominated by the fixed per-transaction fee at small ticket sizes: at 2.6% + $0.10, a $10 ticket costs 3.6% and a $200 ticket costs 2.65%. A coffee shop and a contractor on the same processor pay very different rates.

Worth knowing. Interchange typically runs 1.15–3.15% depending on card type and how the transaction is entered; all-in effective rates for small merchants usually land between 2.2% and 3.5%. Rule of thumb, not survey data. Rewards and corporate cards sit at the top of the range, so B2B merchants run structurally higher.

Where it breaks. Comparing the monthly lease payment to the monthly loan payment. That ignores the residual: you own an asset at the end of one and nothing at the end of the other. And treating a $1-buyout lease as a lease: for tax purposes it is usually a conditional sale, so you depreciate the asset and deduct interest, not the payments.

Worth knowing. Two 2026 rules change the after-tax math, so run both paths with your CPA’s figures: 100% bonus depreciation is permanent for property acquired after January 19, 2025 under OBBBA, and §179 allows $2,560,000 with phase-out beginning at $4,090,000 (Rev. Proc. 2025-32). §179 is limited to business income and carries forward; bonus depreciation is not so limited and can create an NOL instead. Lease payments are deductible as rent only under a true lease. The IRS lists the signs of a conditional sale, among them a purchase option at a nominal price compared with the equipment's value, payments that build equity, or payments that are an inordinately large part of the price, and then you are treated as the buyer: you depreciate the equipment and deduct the interest, not the payments (IRS small-business FAQ; Rev. Rul. 55-540).

Watch. How this is worked out. Buying assumes you pay cash and deduct the whole price in the first year (100% bonus depreciation or §179) at your marginal rate, with enough taxable income to use it; the saving is counted at the start. Equipment you still own at the end is valued at its expected market value less the tax on selling it, on every path, so owning and returning are compared on the same footing. Every cash flow is discounted at your after-tax cost of money, converted to a monthly rate. The rate implied in the quote uses only the price, the payments on their due dates and the purchase option: never your discount rate.

Sources. IRS: leases versus conditional sales contracts (small business FAQ); IRS Rev. Proc. 2025-32: 2026 inflation adjustments, including §179

Where it breaks. Applying the percentage to revenue instead of profit. Then: missing the 110% step-up when last year's AGI was over $150,000, treating this planning share as the amount the IRS requires, and forgetting state estimates.

Worth knowing. Federal only, 2026. Self-employment tax is 15.3% on 92.35% of net profit: 12.4% Social Security up to the $184,500 wage base (less any W-2 wages of your own, SSA) and 2.9% Medicare, plus 0.9% Additional Medicare Tax on earnings above $200,000 single or $250,000 joint: a threshold that wages, yours and a joint-filing spouse's, use up first (IRS Form 8959 instructions). Income tax uses the 2026 brackets and standard deduction ($16,100 single, $32,200 joint; IRS IR-2025-103) and the §199A deduction, including its wage-and-property limit above $201,750 single or $403,500 joint and the new $400 minimum (Rev. Proc. 2025-32; IRS Pub. 505). The set-aside is the extra federal tax your profit adds on top of the household's other income, so a spouse's salary is taxed on its own and not charged to the business. Not modeled: credits, state tax, itemized deductions, the 3.8% net investment income tax, lower rates on qualified dividends and capital gains, self-employed health insurance and retirement contributions (both of which lower QBI), and Additional Medicare Tax an employer withholds. For required payments, the safe harbor is the smaller of 90% of this year's tax or 100% of last year's (110% if last year's AGI was over $150,000), and no estimates are required if you will owe under $1,000 after withholding (IRS Pub. 505).

Watch. Under the IRS safe-harbor rule, paying 25% of the safe-harbor amount by each due date (April 15, June 15 and September 15, 2026 and January 15, 2027) avoids the underpayment penalty however your income falls during the year, even if most of it arrives in the fourth quarter. Confirm your amounts with your CPA. The periods are uneven (January–March, April–May, June–August, September–December), which matters only if you pay less than that early in the year: the annualized income installment method (Form 2210, Schedule AI) then lets smaller early payments count when the income genuinely came late.

Sources. IRS Publication 505 (2026): Tax Withholding and Estimated Tax; IRS Rev. Proc. 2025-32: 2026 brackets, standard deduction and §199A thresholds; SSA: 2026 Social Security wage base

Where it breaks. Quoting the bracket and leaving out self-employment tax, then using that number to judge equipment purchases, retirement contributions and whether a spend is worth it after tax.

Worth knowing. Federal only, 2026, using the same engine as the Quarterly Tax Set-Aside: self-employment tax, Additional Medicare Tax, the deduction for half of self-employment tax, the §199A deduction with its limits, and the 2026 brackets. Below the Social Security wage base and the §199A threshold, an owner in the 22% bracket with no other income is deciding at about 30.5%, and one in the 24% bracket at about 32%.

Watch. The rate can move in both directions as income rises. It falls by roughly ten points once your own W-2 wages plus net self-employment earnings pass $184,500, because the 12.4% Social Security part stops; it rises by just under a point past the Additional Medicare threshold; and inside the §199A phase-in range each extra dollar can also shrink the deduction.

Sources. IRS Rev. Proc. 2025-32: 2026 brackets, standard deduction and §199A thresholds; SSA: 2026 Social Security wage base

Where it breaks. A zero or token salary on real profit: the pattern the IRS reclassifies as wages. And judging the election on payroll tax alone: the smaller §199A deduction, the corporation's own payroll taxes and the cost of running payroll can erase much of the headline saving. Lower W-2 wages also shrink Solo 401(k) and SEP contribution room and future Social Security benefits.

Worth knowing. Payroll-tax savings and total tax savings are different numbers. The S corp avoids self-employment tax on profit you take as distributions, but salary is not qualified business income, so the §199A deduction usually shrinks, and the corporation's payroll taxes and running costs come out of profit first. Reasonable compensation is a facts question: the IRS (S Corporation Compensation and Medical Insurance Issues, updated March 3, 2026) points to training and experience, duties, time devoted, what comparable businesses pay for similar services and other factors: there is no '60/40 rule'. The extra annual cost usually covers a payroll service, the Form 1120-S and state fees; California, for example, adds an $800 minimum franchise tax and a 1.5% S-corporation tax. State income and unemployment taxes are not modeled.

Watch. Above the §199A threshold ($201,750 single or $403,500 joint for 2026), salary also moves the deduction: the wages the S corp pays can raise the wage limit, while every dollar of salary is a dollar less of qualified business income. Whether a higher or lower salary lowers your total tax depends on your figures, which is why this shows the net at the salary you enter rather than a rule. Salary still has to be reasonable for the work you do; the tax result is not a factor the IRS accepts.

Sources. IRS Rev. Proc. 2025-32: 2026 brackets, standard deduction and §199A thresholds; SSA: 2026 Social Security wage base · IRS: S corporation compensation · California FTB: S corporations