How Business metrics works

This page is the method behind Know Your Numbers: what we calculate, what we do not claim, and how the status labels are produced. It exists so you can check our work instead of trusting a black box.

1. You enter facts you already have — or correct our typicals

Each industry calculator starts filled. We pick a concept (coffee shop vs casual restaurant, boutique vs grocery, duplex vs small apartment building), a size band, and a market. Cost and revenue typicals are scaled with a simple state/country cost index. Seats, square footage, and similar operating facts come with the concept — for example a typical coffee shop is modeled around 22 seats, not a 70-seat dining room.

Every pre-filled number is labeled Guess until you edit it. Edits are labeled Yours and are not overwritten when you change concept, size, or ZIP. You can still start from a blank form. Typicals are educational, not a census of real shops in your ZIP.

Industry pages then ask for the extra facts that actually drive that business — seats and labor for a restaurant, nights booked for a short-term rental, miles and fuel for a truck. Rough estimates are allowed; we would rather you run a directional check than skip the metric entirely.

2. We calculate every ratio those facts support

Nothing is required. If a formula is missing an input, that KPI stays unlocked with a note about which field would complete it. We do not hide “premium” ratios. Debt service coverage, cap rate, and inventory turns are often the numbers a lender cares about most — they should not sit behind a wall.

Universal ratios (gross margin, net margin, cash flow, burn, runway, run rate) are computed the same way on every industry so a cafe and a contractor can compare apples to apples on the shared scoreboard. Industry modules add the metrics that actually drive that kind of business.

3. Status labels use published ranges, not vibes

When a KPI has a benchmark band, the card is labeled excellent, on target, watch, or critical. Those bands live in the product’s benchmark table. They are starting points drawn from common industry rules of thumb (for example, independent restaurant prime cost often watched near 65%, many small-business net margins in a low-to-mid single-digit to mid-teens band, DSCR commonly discussed around 1.25× for small commercial loans).

A steakhouse food-cost % will not look like a coffee shop. A Class B rental in one city will not match another. If your honest number sits outside the band, read the coaching and your own context before you change prices. The label is a prompt, not a verdict.

4. Coaching is written in two registers

Owner translation says what the number means in the operation (“food and labor are eating 67 cents of every sales dollar”). Executive translation uses the language a banker, buyer, or finance partner is likely to use. Both sit on the same KPI so you can talk to a bookkeeper and a loan officer without switching tools.

When a metric is watch or critical, the card includes numbered actions. Those actions are generic operating hygiene — check invoices, test a price, call a customer who has not paid — not personalized advice.

5. Privacy is architectural, not a promise in a popup

The calculator files run in your browser. Document upload (PDF, photo, CSV) is parsed on your device and discarded from memory after fields are filled. We do not operate a backend database of your P&L. A working draft can remain in local storage on this browser; we do not receive it. Analytics, when enabled, counts page views and button clicks — not the dollar amounts you typed.

To localize typicals, your browser may call a public IP-to-location service and a ZIP lookup. Those vendors see a network request from you. Arnali does not get your P&L from that lookup. That design is the product: people will not paste real numbers into a site they think is harvesting books.

Formulas we actually use

Gross profit margin

(Revenue − Cost of what you sold) ÷ Revenue × 100

Cost of what you sold can be $0 for a pure service business. That is a valid input, not a missing one.

Net profit margin

Net profit or loss ÷ Revenue × 100

Uses the net figure you enter. We do not silently recompute tax.

Cash runway

Starting bank balance ÷ Monthly burn

Burn is the absolute value of net monthly cash flow when money out exceeds money in. If you are cash-flow positive, runway is not the constraint we highlight.

Food cost %

Food and beverage cost ÷ Revenue × 100

On the restaurant calculator, “cost of what you sold” is treated as the food-and-beverage invoice total for the same period as revenue.

Prime cost %

(Food and beverage cost + Labor) ÷ Revenue × 100

Labor should include payroll taxes and typical kitchen/front-of-house wages for the same period. Prime cost is the first place many independent restaurants bleed.

RevPASH

Revenue ÷ (Seats × Service hours per day × Days open)

If revenue is annual, use annual days (days open per month × 12) so the denominator matches the period. A low RevPASH with a full dining room usually means the check is too small or the turn is too slow.

DSCR

Net operating income ÷ Annual debt service

Use NOI for the property or business that supports the loan, not household leftover. Many small-business and rental underwriters talk about 1.25× as a common conversation starter, not a guarantee of approval.

LTV

Loan amount ÷ Property value × 100

Value can be a recent appraisal, a conservative AVM, or a broker opinion. Garbage in, garbage out — we invite estimates, but a fantasy value produces a fantasy LTV.

Cap rate

Annual NOI ÷ Property value × 100

This is an unlevered yield. It does not include your mortgage. Cash-on-cash is the levered cousin and needs cash invested and cash flow after debt.

Debt-to-income (DTI)

Monthly personal debt payments ÷ Monthly personal income × 100

This is a household ratio many consumer and some small-business files still reference. It is not the same as DSCR.

Limits

  • We do not connect to your bank, POS, or QuickBooks. You are the source of truth.
  • We do not file taxes, produce GAAP statements, or underwrite a loan.
  • Currency switching changes labels, not foreign-exchange math.
  • Industry ranges will be wrong for some niches (fine dining vs. QSR, Class A vs. C property, dry van vs. reefer). Read the number, then apply your market.
  • Pre-filled typicals are educational models (concept × size × a cost-of-living index), not a live feed of shops in your ZIP. Treat Guess labels as a starting point.
  • Exports (Excel, PDF, PNG, JSON) are generated on your device. Treat them like any other file you created.