# Reading the Business Numbers don't speak for themselves. The same figures can tell completely different stories depending on what you compare, how you aggregate, and what you're trying to decide. A 20% margin might be excellent or terrible. A 10% growth rate might signal momentum or decline. Context is everything. This section builds fluency — not accounting mechanics, but the ability to see through numbers to the underlying reality. The goal is to know what questions to ask, what comparisons matter, and when a number is telling you something versus when it's noise. --- ## Where to start **[[Notes/Ratios|Ratios]]** — Dividing one number by another is the simplest analytical move. It's also one of the most powerful. What you choose to divide by shapes what you see. **[[Notes/Unit Economics|Unit Economics]]** — Does adding customers create value or consume it? The foundation of whether a business model works. --- ## Building the foundation How to think about numbers before diving into specific metrics. **[[Notes/Scale|Scale]]** — Before asking if a number is exactly right, ask if it's roughly right. Most business errors are 10x, not 10%. **[[Notes/Confidence|Confidence]]** — A number without a confidence level is a guess dressed as a fact. How sure are you? **[[Notes/Variance|Variance]]** — Not all variation requires action. Knowing when to react and when to wait. **[[Notes/Small Samples|Small Samples]]** — At n=20, the qualitative signal is more reliable than the quantitative noise. When to trust stories over statistics. **[[Notes/Order of Magnitude|Order of Magnitude]]** — Most business debates happen at the wrong level of precision. Getting the zoom level right. --- ## From numbers to insight How data becomes information — and when it doesn't. **[[Notes/From Data to Information|From Data to Information]]** — Data doesn't become information until it passes through a decision process. Otherwise it's just noise with structure. **[[Notes/Accounting for Widgets|Accounting for Widgets]]** — Why inherited accounting numbers mislead. Throughput thinking over cost allocation. **[[Notes/Effort to Impact|Effort to Impact]]** — Every metric sits somewhere on a chain: effort → output → outcome → impact. Most reporting stops too early. **[[Notes/Unknown and Unknowable|Unknown and Unknowable]]** — The most important figures are often unknown or unknowable. Learning to reason under uncertainty. --- ## The metrics that matter The specific numbers that reveal how a business actually works. **[[Notes/Unit Economics|Unit Economics]]** — Does adding customers create value or consume it? The foundation. **[[Notes/Recurring Revenue|Recurring Revenue]]** — How hard you have to run just to stand still. The baseline that determines everything. **[[Notes/Gross vs Net Retention|Gross vs Net Retention]]** — Churn versus expansion from existing customers. The difference between a leaky bucket and a growing one. **[[Notes/FCF Conversion|FCF Conversion]]** — Do profits become cash? Earnings are accounting. Cash is real. **[[Notes/Asset Turnover|Asset Turnover]]** — Where the real leverage hides. How hard your assets are working. **[[Notes/EBITDA in Software|EBITDA in Software]]** — What the headline numbers hide. Why software EBITDA needs adjustment. **[[Notes/Limits to Growth|Limits to Growth]]** — Every recurring revenue business has a ceiling. Where is it? --- ## Suggested reading order If you're working through this section systematically: 1. [[Notes/Ratios|Ratios]] — the foundational move 2. [[Notes/Scale|Scale]] — getting the zoom level right 3. [[Notes/From Data to Information|From Data to Information]] — what makes numbers useful 4. [[Notes/Unit Economics|Unit Economics]] — the core business model question 5. [[Notes/Recurring Revenue|Recurring Revenue]] → [[Notes/Gross vs Net Retention|Gross vs Net Retention]] — the subscription dynamics 6. [[Notes/FCF Conversion|FCF Conversion]] — where the money goes Then explore the deeper posts based on what's relevant to your context. --- ## Reference **[[Metrics|Metrics Glossary]]** — The complete reference, organised by use case. --- ## Connects to **[[Making Decisions|Making Decisions]]** — Numbers are raw material for judgement. Reading the business feeds into building the learning systems that improve decisions over time. **[[Buying and Fixing|Buying and Fixing]]** — Due diligence is applied business reading. The metrics here form the backbone of acquisition assessment. ---