The CEO’s Guide to the Financial Numbers That Actually Matter

This post exists because of a conversation I had this week. 

Different company. Different industry. Same outcome. 

Profit was down last year. Not catastrophic — just disappointing. Enough to raise concern. 

I asked the CFO a simple question: 

“What’s your LER?” 

Blank look. 

“How about MLER?” 

Still nothing. 

They weren’t evasive. They weren’t incompetent. Their answer was straightforward: 

“Those aren’t standard finance terms.” 

They’re right. They aren’t. 

And that’s exactly the problem. 

Accounting Tells You What Happened. Strategic Finance Tells You Why. 

Most companies are well-covered on accounting: 

• Clean financials 

• Monthly reporting 

• Reasonable forecasts 

• Compliance handled 

That’s table stakes. 

But accounting is backward-looking. It explains what happened after the fact. 

Strategic finance is different. It helps you understand: 

• How your business actually makes money 

• Where leverage exists (or doesn’t) 

• Why profit doesn’t show up when revenue grows 

If profit is weak and nobody can explain why, you don’t have a visibility problem. 

You have a strategy problem. 

Every CEO Should Read This Before Scaling 

Simple Numbers by Greg Crabtree is a book that should be required reading for any CEO running a people-heavy business. Greg Grabtree does an excellent job at highlighting several key points about key financial metrics CEOs should know.  

• It exposes how labour really drives profit 

• It introduces LER and MLER 

• It forces clarity on leverage, not just margin 

If revenue is growing and profit isn’t, Simple Numbers explains why. 

The Numbers Every CEO Should Know (and What “Good” Looks Like) 

You don’t need to calculate these every day. 

But you do need to understand what they mean, what “healthy” looks like, and what breaks when they’re off. 

1. 1. LLGM — Labour-Loaded Gross Margin

Labour Loaded Gross Margin (LLGM), is a metric that shows profitability for a business’ core services after accounting for direct materials/tools and direct labour costs. Gross margin with direct labour included above the line. 

Why it matters: 

• Traditional gross margin hides labour-heavy inefficiency 

• LLGM shows the real economics of delivery 

CEO question to ask: 

“Are our margins real — or accounting fiction?” 

2. LER — Labour Efficiency Ratio

The Labour Efficiency Ratio (LER) measures how effectively a business can convert labour costs into profit. Labour-loaded gross margin ÷ direct labour cost. 

Hard rule: 

LER must be over 2.0. Always. 

Under 2.0 means something is broken in delivery. 

What it tells you: 

• Whether labour creates leverage 

• Or simply consumes revenue 

If LER is low, pricing is rarely the root cause. 

The problem is almost always how work gets done.

3. MLER — Management Labour Efficiency Ratio

Management Labour Efficiency Ratio (MLER) is a way of measuring how effectivement management staff generate profit. Labour-loaded gross margin ÷ management labour cost. 

Hard rule: 

MLER must be over 3.0. 

Below that, leadership cost is outpacing value creation. 

What it tells you: 

• Whether leadership multiplies impact 

• Or acts as a workaround for broken systems 

Low MLER usually means leadership is rescuing execution instead of scaling it.

4. Billable Utilization

Billable Utilization measure the percentage of time billable staff spend on revenue-generating work. 

Why it matters: 

• Explains low LER 

• Reveals operational drag 

• Highlights role confusion and mis-scoping 

Low utilization is rarely a motivation problem. 

It’s a system design problem. 

5. Write-offs

If write-offs are common, your margins are theoretical. 

What to watch: 

• Frequency 

• Root causes 

• Whether they’re “normalised” 

Why they matter: 

• Booked revenue ≠ real margin 

• Write-offs hide delivery failure 

• They train the organization to accept inefficiency 

6. CAC — Customer Acquisition Cost

Why it matters: 

• Shows how expensive growth really is 

• Sets expectations for payback 

CEO signal: 

• Is growth funding the business… 

• Or consuming cash while you wait for profit?

7. CLV — Customer Lifetime Value 

Important nuance: 

Total CLV matters less than how long it takes to realize it. 

Why it matters: 

• Long payback periods increase risk 

• Thin margins magnify delivery mistakes 

• Growth becomes fragile instead of powerful

A big CLV number doesn’t help if it arrives too late. 

The Power of 1%: Where Strategy Becomes Real 

This tool comes straight out of Cash Flow Story — and it’s one of the most useful strategic exercises I know. 

Ask a simple question: 

What happens next quarter if one of these improves by just 1%? 

• Revenue 

• Gross margin 

• Overhead 

• DSO 

• Inventory turns (where applicable) 

You don’t need to improve everything. 

You need to identify where leverage actually lives in your business — right now. 

That’s strategy. Not forecasting. 

If You Don’t Know These Numbers, You’re Guessing 

When these metrics aren’t visible: 

• Decisions become opinion-driven 

• Profit surprises become normal 

• Growth increases risk instead of return 

• Leadership debates symptoms, not causes 

This isn’t about being a finance expert. 

It’s about owning the economic engine of your business. 

The CEO Line in the Sand 

If your CFO can’t explain these numbers — or what “good” looks like — that’s not a CFO problem. 

It’s a leadership one. 

Because while accounting can be delegated, judgment can’t.  

And if profit keeps surprising you, the business is already telling you something you’re not hearing.