3 Small Business Financial Questions You Should Be Able to Answer (Most Ignore Them)

Small business financial questions are often ignored by owners, because there is a weight behind not knowing the answers. So most owners find themselves in a situation like this…

You’re sitting in a meeting with your accountant. Or your bank manager. Or a business partner you’re considering bringing on. And they lean forward and ask you three questions:

1. What’s your gross margin?
2. Which product or service is your most profitable one?
3. How much runway do you have if sales dropped to zero tomorrow?

You know the numbers exist. You’ve seen them somewhere. But right now, in this moment, with someone looking at you across a table — you can’t answer any of the questions with confidence.

You are NOT alone in that reaction. 

If I ran this test on a hundred women business owners, I’d bet somewhere between 70-80% of them would fumble at least one answer. All smart, capable, successful business owners… who have never had someone sit them down and say: 

“These three things. Learn to answer these three small business financial questions, and you’ll be ahead of the game.”

So let’s dig in a little. 

Here are the three small business financial questions, why each one matters, and how to find your answer in the next twenty minutes.

Small Business Financial Questions – Q1: What’s my gross margin?

In plain English: gross margin is what’s left after you subtract the direct cost of delivering your product or service from what your customer pays you.

• If you sell a $200 candle that costs you $60 in wax, wick, jar, label, and shipping — your gross margin on that candle is $140, or 70%. 

• If you’re a coach or consultant charging $500 for a session and it costs you $75 in software, contractor time, and admin — your gross margin per session is $425, or 85%.

Why it matters: gross margin tells you how much money the business is actually generating from each sale, before any overheads. 

It’s the single most important number for deciding what to sell more of, what to raise prices on, and what to stop doing altogether.

Because a business with 60% gross margins has completely different options than one with 20%. The first can spend on marketing, hire staff, and invest in growth. The second is running on fumes even when it looks busy. Same ‘top line’ revenue, entirely different reality.

How to find yours: in your Profit and Loss, it’s usually the second-largest number below Revenue. Usually labelled “Gross Profit” on your P&L. Divide it by Revenue to get the percentage.

If you don’t have a P&L handy, work it out one product or service at a time: 

1. Take your best-selling offer. 
2. Write down what you charge. 
3. Write down every direct cost of delivering it. 
4. Subtract. That’s your gross margin on that offer.

I recommend doing this for your top three offers. You might be surprised at which products and services are ‘proving their worth’.

Small Business Financial Questions – Q2: Which product or service is my most profitable?

Not the one with the most sales. Not the one that gets the most attention. The most profitable one.

Why it matters: most business owners intuitively think their biggest seller is their money-maker. 

Very often, it isn’t. 

The biggest seller might actually have the tightest margins, or eat the most of your time, or require the most after-sales support. Meanwhile, some quiet product in the corner is doing the actual work of keeping the business alive. I see this time and time again.

Here’s the classic version:

A boutique retailer decides that her best-selling product line is her linen shirts — high-volume, an exciting revenue chart, prominently featured in every marketing campaign. When she does the numbers, the linen shirts have a 22% margin and are tying up half her stock budget. 

Meanwhile, her jewellery line — third in revenue, no marketing budget — had a 68% margin. The jewellery is funding the business. The shirts are just moving stock.

She doesn’t stop selling shirts. But she reorganises her marketing, her buying, and her display windows around what she knows to be her most profitable product line.

How to find yours: 

1. For each product or service, calculate the gross margin (question 1)
2. Then multiply it by the number you sold last year. 
3. That gives you the total gross profit contribution of each offer. 
4. Rank them. The one at the top is your most profitable.

If you sell services (rather than products), the same logic applies — you’re just replacing “unit cost” with “your time plus support costs.”

Small Business Financial Questions – Q3: How much runway does my business have?

A mentor of mine once asked me this…

…if I stopped working tomorrow, how many days forward would I be able to survive on the cash and assets available?  

It was a sobering experiment back then and the motivation for my focus on investing (a subject for another time).

But we should apply this same thinking to our business.

In plain English: Your runway is how many weeks, months, or years your business could keep running if sales dropped to zero tomorrow and you only had the cash currently in the bank to pay expenses.

Why it matters: Every business death starts the same way — running out of cash. 

Not out of ideas, not out of customers, not out of market. 

Out of cash. 

Runway is the single number that tells you how much time you have if something unexpected happens. (And something unexpected always happens eventually.)

→ If you have three months of runway, every decision needs to lean toward “protect the cash.” 

→ If you have twelve months, you have breathing room to invest, hire, and experiment. 

→ If you have twenty-four months, you can play a completely different game — you can turn down the wrong customers, take strategic risks, and make patient decisions.

How to find yours: two numbers, one division.

1. Look at your bank balance. That’s your cash.
2. Look at your average monthly expenses over the last three months. That’s your burn.
3. Divide cash by burn. That’s your runway in months.

Example: $45,000 in the bank ÷ $15,000/month expenses = 3 months of runway.

That’s it. Ninety seconds of work.

Most business owners have never done this calculation on their own business. 

They’re vaguely aware of those two numbers (cash and burn) separately, but they’ve never put them side by side. 

When they do — for the first time — something changes. 

Either the number is bigger than they feared and they feel a wave of relief, or it’s smaller than they hoped and they immediately start making better decisions.

If you couldn’t answer all three — good.

If you sailed through all three small business financial questions, congratulations. You’re in the top 15% of small business owners, and you already know what you’re doing with your numbers.

If you struggled with one or two — welcome to the club. This is where the vast majority of small business owners live. 

And that’s because the language of business finance is genuinely foreign to most of us, and nobody teaches us how to read it. You wouldn’t blame someone for not being able to read French if they’ve never studied French.

Here’s what makes this so damaging. Research consistently shows that a substantial share of women small-business owners can’t confidently answer these questions about their own businesses. That in itself isn’t the problem. The problem is what happens next.

When you can’t answer basic questions about your own numbers, something shifts in the way you show up. 

→ You defer to your accountant rather than directing the conversation. 

→ You second-guess your pricing. 

→ You avoid the money meetings. 

→ You make decisions by feel and hope they work out. 

And the worst part? You start to believe you’re not the kind of person who understands business finance. 

That belief doesn’t stay isolated. 

It leaks into every other part of the business. It shrinks how boldly you price, how confidently you hire, how directly you lead your team.

The reverse is also true. When you CAN point to your gross margin, name your most profitable product, and tell someone how much runway you have — off the top of your head, calmly, in a meeting — you stop being the person waiting to be told what the numbers mean. 

You start being the person leading from them. You’re able to understand the finances of being a business leader.

Confidence goes up. Leadership goes up. The business follows.

That’s the real reason to learn this. Not because your accountant needs you to. Because you do.

This language is learnable. And once you can read it, you never lose the skill.

The three questions above are the foundation. Not the whole picture, but a huge part of it. Get comfortable answering these, and the rest of the finance conversation stops feeling like a foreign language.

If you’d like to go deeper — if you’d like the full system that teaches you how to read your P&L, build a real budget you actually use, and lead confident money decisions in your business — that’s exactly what we built the Small Business Finance Course for. 

It’s a proven system to understand your money, build a budget that actually works, and make confident decisions — without becoming an accountant.

Three modules, self-paced, plain English, and designed specifically for women business owners.

→ Get The Small Business Finance Course

Even if you’re not ready for the course, bookmark this article, run the three-question test on yourself once a quarter, and share this post with any business owner friend who could use it. 

The three questions themselves are worth more than a lot of the expensive advice out there.

You started your business to build something you’re proud of. Understanding your numbers is how you stay in the driver’s seat while you do it.