Example business situation: You ran a $6,000 campaign and gained 120 new customers. Should you repeat it or shift the budget?

What you gain: Determine the average acquisition cost ($50 in this example), compare it with contribution profit per customer, and set a realistic acquisition-spending ceiling.

Formula: Acquisition cost = total acquisition expenses ÷ new customers.

This is the average cost to acquire one new customer. Compare it with the expected contribution profit from those customers, not merely their sales revenue.

Example business situation: A customer returns several times a year. Is it worthwhile to spend more to acquire similar buyers?

What you gain: Estimate lifetime contribution rather than treating an initial order as the entire customer value; assess how retention can change the acquisition budget.

Formula: Lifetime contribution ≈ revenue per purchase × contribution margin × annual purchase frequency × lifespan.

Lifetime contribution is the amount available to cover acquisition costs and fixed overhead, before adjustments for discounting and customer-specific servicing costs.

Example business situation: Two advertising channels generate sales, but one costs much more.

What you gain: Compare campaign-attributed contribution with campaign expense to identify which channel may merit more investment.

Formula: ROI = (attributed contribution profit − campaign cost) ÷ campaign cost × 100.

The ROI measures contribution attributable to the campaign after subtracting its cost. Attribution rules and contribution margins can materially affect this result.

Example business situation: Your website attracts inquiries, but relatively few prospects become paying customers.

What you gain: Identify the weakest stage and estimate where fixing the conversion process could have the greatest impact.

Formula: Stage conversion = number entering next stage ÷ number in previous stage × 100.

Stage conversion rates reveal where prospects are lost. The lowest percentage is not necessarily the most valuable bottleneck: stage volumes and improvement costs also matter.

Example business situation: Consider a relevant real-world business decision.

What you gain: Use the result to guide a follow-up decision.

Formula: Gross margin = (price − direct cost) ÷ price × 100. Markup = (price − direct cost) ÷ direct cost × 100.

Margin is profit divided by selling price. Markup is profit divided by cost. They are not interchangeable.

Example business situation: You are considering a new service with fixed monthly costs and a known profit contribution per booking.

What you gain: Find the minimum whole number of sales needed to cover fixed expenses before setting a sales target.

Formula: Break-even units = fixed costs ÷ (price per unit − variable cost per unit), rounded up.

Each sale contributes revenue minus variable cost toward fixed costs. Rounding up ensures enough whole units to reach break-even.

Example business situation: Your supplier raised prices, and you are considering increasing your retail price.

What you gain: Estimate how many sales you could lose while maintaining the same contribution, or how many additional sales a discount would require.

Formula: Required new units = current total contribution ÷ new contribution per unit.

A higher price can maintain contribution with fewer sales, but actual demand may change. A lower price typically requires more units.

Example business situation: Your top-selling item generates a lot of revenue but may have low unit margins.

What you gain: Estimate total contribution by product so you can identify high-volume, low-profit offerings and prioritize profitable ones.

Formula: Product contribution = (unit price − variable unit cost) × units − specific fixed costs.

This estimate is after variable costs and entered product-specific expenses, but before unallocated company overhead and taxes.

Example business situation: Sales temporarily slowed, and you need to know how long cash reserves can sustain current spending.

What you gain: Estimate months of operating runway at the entered net cash burn and spot the need for a contingency plan.

Formula: Runway (months) = available cash ÷ monthly net cash burn.

Runway divides available cash by average monthly net cash outflow. It assumes the burn rate does not change.

Example business situation: Upcoming vendor bills and payroll are approaching while payments from customers are delayed.

What you gain: Check the cushion between current assets and current liabilities, as well as the current ratio, to assess short-term pressure.

Formula: Working capital = current assets − current liabilities. Current ratio = current assets ÷ current liabilities.

Positive working capital indicates current assets exceed current liabilities, but inventory and receivables may not be readily available as cash.

Example business situation: A few large customers account for a major share of annual revenue.

What you gain: Quantify dependence on your top customers and prioritize retention or diversification to reduce exposure to any one account.

Formula: Concentration = top-five customer revenue ÷ total revenue × 100.

High concentration means changes in a few customer relationships could materially affect revenue. No single concentration threshold fits all businesses.

Example business situation: Your bank balance looks healthy, but payroll, rent, and taxes are due before several invoices are paid.

What you gain: Estimate ending cash and distance from your chosen minimum buffer to make upcoming funding needs visible.

Formula: Ending cash = opening cash + expected receipts − expected payments.

This is a single-period cash projection, not a probability forecast. Cash can temporarily fall below the closing balance within the period.

Example business situation: You began the quarter with 500 customers and added new customers, but need to know how many older customers stayed.

What you gain: Separate retained customers from new additions and monitor the strength of the existing customer base.

Formula: Retention rate = (ending customers − new customers) ÷ starting customers × 100.

Retention describes the share of starting customers who are still active at the end. New customers are excluded from the retained group.

Example business situation: A subscription or repeat-service business sees frequent customer departures.

What you gain: Measure the share of starting customers lost and test whether retention initiatives are improving outcomes.

Formula: Churn rate = lost starting customers ÷ starting customers × 100.

Churn measures customer losses from a defined starting cohort. It is the complement of retention when cohort and time definitions agree.

Example business situation: Appointments are sparse on weekdays but the team is fully booked on weekends.

What you gain: Measure unused practical capacity and determine when targeted promotions may fill open time without causing overload.

Formula: Utilization = used capacity ÷ practical available capacity × 100.

Utilization compares work delivered with realistic available capacity, not an impossible theoretical maximum.

Example business situation: You offer a referral incentive and need to know whether referred customers justify the program cost.

What you gain: Estimate initial contribution net of referral costs and compare referrals with other channels on a consistent basis.

Formula: Net referral contribution = referrals × revenue per customer × contribution margin − referral costs.

This uses initial purchase contribution only, not full customer lifetime value. Costs should include incentives and operating costs.