Your business is making money if, after every cost is paid — stock, rent, staff, transport, tax, and your own time — there is something left, and there is something left month after month. Sales alone don't answer the question: your busiest month can still be a losing one.
Most owners never get a straight answer to this, not because the maths is hard, but because nobody ever showed them which numbers to look at. Here's how to check.
Why "I sold a lot today" doesn't mean you made money
You always know what you sold. That number is visible, it's satisfying, and it's the one you carry home in your head.
But a sale is not money kept. Every sale carries costs with it — what the goods cost you, what it cost to get them there, and a share of the rent, power and wages you pay whether you sell anything or not. What matters is what survives all of that.
This is why two businesses with identical sales can be in completely different positions. One keeps 15 out of every 100 sold. The other keeps 1. The second owner is working fifteen times harder for the same result — and often has no idea, because both of them are looking at the same encouraging sales figure.
Being busy and making money are two different things. So are making money and having money — which is where most owners get caught out.
And one month, on its own, tells you very little. A single good month can be a big order that won't repeat; a single bad one can be a supplier who raised prices for a week. What you're looking for is the pattern — whether the number is holding, drifting, or falling. Keep that in mind as you read on: you're not looking for a verdict, you're looking for a direction.
The four vital signs: how to tell if your business is financially healthy
There's a quick version of this question and a thorough one. This is the quick version.
Think of these like vital signs. A nurse takes your pulse, your temperature and your blood pressure in about two minutes. That isn't a full examination and was never meant to be — but it's enough to tell whether something needs a closer look. These four do the same job for a business.
Each answers a different question, and a business can look fine on three and be in real trouble on the fourth. Checking all four takes a few minutes and will tell you more than a year of watching your sales figure.
1. You keep something from every sale — profit
The question: are you earning? This is your profit margin — the share of each sale that stays with the business after everything is paid, including paying yourself.
That last part matters more than anything else on this page. If your margin is 6%, then for every 100 you sell, 6 stays. Whether that's good depends on what you do: retail and market trading sit healthily at around 2–5%, while salons, tailoring and other service businesses reach 5–15%. Those numbers look low because they count the owner's own pay as a cost — which it is.
Work it out with the profit margin calculator →
2. The money is there when you need it — cash
The question: can you pay? This is cash flow stability — whether the business can meet what it owes, when it's due.
You can be profitable on paper and still be unable to pay rent on the 30th, because profit and cash arrive on different days. A business that is technically profitable but permanently scrambling is not a healthy business. It's a fragile one.
How to check: count how many months in the last six you had to delay a payment, borrow, or use personal money to cover a business cost. More than two is a signal.
3. No single customer can end you — concentration
The question: how exposed are you? This is customer concentration — how much of your income depends on one buyer.
If one customer is 40% of your sales, you don't have a customer. You have a risk. When they leave, negotiate you down, or start paying late, it isn't a bad month — it's an emergency. Plenty of businesses look healthy right up to the moment their biggest customer walks.
How to check: take your largest customer's spend over the last three months and divide it by your total sales. Anything above 25–30% is worth taking seriously.
4. The business can run without you — dependence
The question: would it survive? This is owner dependence — how much of the business lives in your head and your hands.
If you're the only one who knows what stock costs, which customers owe what, and how the pricing works, then the business doesn't really exist separately from you. It's a job that employs you and can't continue without you. That shows up the first time you're ill, travelling, or dealing with a family matter — and it's the reason many profitable businesses never grow past their owner.
How to check: ask what would happen if you stepped away for two weeks with no notice. Could someone else open, sell, pay a supplier, and know what to charge? If the honest answer is no, that's the sign to work on — regardless of how good the other three look.
What these four don't tell you
Vital signs are fast, not complete. They'll tell you that something needs attention; they won't tell you how serious it is, how the four interact, or which one to deal with first when more than one is flashing.
That's the difference between taking your own pulse and having a proper check-up. The rest of this guide covers how to work the numbers yourself — and if you'd rather not, there's a shortcut at the end.
A check you can do yourself in ten minutes
You don't need software or an accountant to get a rough answer. You need last month's numbers and a quiet ten minutes.
Don't worry about getting the numbers perfect. An honest estimate tells you far more than no estimate at all, and you can tighten it next month. The point is to find the shape of the thing, not to file accounts.
Step 1 — Add up everything that came in
All sales for the month. Money in, before anything is taken out.
Step 2 — Add up what the goods themselves cost
Stock, ingredients, materials, fabric. Only the cost of what you actually sold.
Step 3 — Add up everything else you paid to stay open
Rent, staff, transport, fuel, data, levies, repairs.
Step 4 — Add what you took out for yourself
Wages, drawings, money for the house. If you don't pay yourself a set amount, estimate what a month of your time is worth. This step is the one almost everybody skips, and skipping it is why so many small businesses appear to keep 30–40% of revenue. They don't — they're paying the owner out of that number. Leave your own pay out and you're measuring what the business generates, not what it earns.
Step 5 — Subtract, then turn it into a percentage
Sales, minus cost of goods, minus running costs, minus your own pay, minus tax. Divide what's left by your sales and multiply by 100. That's your net margin, and it's comparable month to month in a way the raw figure isn't.
A worked example
A shop sells 900,000. Stock cost 585,000, so gross profit is 315,000 — a 35% gross margin, which is fine. Rent, staff, transport and power take 240,000. The owner takes 45,000 for herself. Tax takes 5,000. What's left is 25,000 — a net margin of 2.8%.
The lesson isn't the number. It's where the money went. This shop prices well; its running costs are what's eating the margin. Cutting supplier prices wouldn't help much — the answer is in the overheads. And notice what the owner's pay did to the result: without it, this shop looks like it keeps 7.8%. With it, 2.8%. Same shop, same month — one figure is honest and one isn't.
Then do it again next month. One month is a data point, not a verdict. Three months is a direction — and a direction is something you can act on. Volatility is the defining feature of small business finances; researchers who tracked African small firms daily found revenue and expenses moving in unpredictable ways month to month.
Why the money runs out before month end
If the check above says you made a profit, and your account still empties before the 30th, you're not confused and the maths isn't wrong. Profit and cash flow are different things, and the gap between them has ordinary causes.
Your money is sitting in stock
You bought goods that haven't sold. On paper it's value. In practice you can't pay rent with it.
Customers owe you
The sale is counted, the work is done, the money hasn't arrived. Every day of delay is a day you're funding someone else's business out of your own pocket.
Your costs and your income land on different days
Suppliers want paying now, customers pay later. The month works out. The middle of it doesn't.
Look at which of those three is true for you. It's usually one, it's usually obvious once you're looking for it, and it's usually fixable — but only if you know which one you're dealing with. Most cash flow problems in a small business are one of these three wearing a different hat.
One more thing worth knowing about thin margins
A thin margin is not automatically a failing business. For trading businesses in particular, the money invested is small and it turns over fast, so the return on what you actually put in can be very high even when the margin looks slim. A field study of small Kenyan retailers found returns to money invested in stock averaging well above local lending rates.
So a market trader running at 3% is not doing badly. What matters is whether that 3% is stable, whether it survives paying you properly, and whether the business could withstand losing its biggest customer or its owner for a fortnight. That's why margin alone was never going to be the whole answer.
The fast check, or the full one
The four vital signs tell you whether something needs looking at. They don't tell you how serious it is, or which problem to deal with first when more than one is flashing.
The Business Health Check goes wider. It works through your profit, your cash, your customer concentration and how much the business depends on you — along with the things a quick check can't reach — and returns a single Business Health Score, plus the highest-impact thing to fix first.
That's the diagnosis. The Monyvo app is how you work on it: it keeps checking in as the business changes, so your priorities stay current instead of sitting in a report you read once.
Free. About 10 minutes. No accounting knowledge needed.
Take your free Business Health Check →
Frequently asked questions
How do I know if my business is making a profit?+
Add up your sales for the month, then subtract the cost of the goods you sold, your running costs, what you took out for yourself, and any tax. If something is left, you made a profit that month. Divide it by your sales and multiply by 100 to get your margin.
What is the difference between profit and cash?+
Profit is what the business earned. Cash is what's actually available to spend. They differ because money can be tied up in unsold stock or in sales customers haven't paid for yet. A profitable business can still run short of cash.
Why does my business run out of money before the end of the month?+
Usually one of three reasons: your money is sitting in stock that hasn't sold, customers owe you and haven't paid, or your bills fall due before your income arrives. Working out which one applies is what points you to the fix.
How much profit should a small business make?+
Less than most owners expect, once their own pay is counted as a cost. Retail and market trading commonly run at 2–5% net, food businesses at 2–7%, and service businesses like salons and tailoring at 5–15%. South Africa's economy-wide average net profit after tax is around 4.5%. What matters more than the benchmark is knowing your own number and whether it's rising or falling.
Why do some sources say African small businesses make 30–40% margins?+
Because those figures usually measure operating margin, which does not deduct anything for the owner's own labour. Studies that track small firms day to day report medians around a third of revenue on that basis. Once you count what the owner's time is worth, the real net margin falls to the low single digits. Both numbers can describe the same business — they're just measuring different things.
What numbers should a small business owner track?+
Four are enough to start: your profit margin, whether you can meet your bills on time, how much of your income depends on your biggest customer, and how much the business depends on you personally.
Should I count my own salary as a business cost?+
Yes. If you work in the business and take money out of it, that's a genuine cost of running it. Leaving it out makes the business look far more profitable than it is and hides whether it's paying you properly. This single choice is the most common reason small business margins get quoted wrongly.
Do I need an accountant to know if my business is healthy?+
No. An accountant is valuable for tax and compliance, but you can check whether your business is working yourself with last month's numbers and about ten minutes.