5 Financial KPIs Every Lower Middle Market CEO Should Track (Plus 1 Bonus)

As a CEO in the lower middle market, your job is to lead, grow, and prepare your business for what comes next. Whether that is expansion, a capital raise, or an eventual exit. But none of that happens effectively without financial clarity.

At Tetelestai Capital, we help founders and leadership teams install the systems and insight needed to scale with confidence. Below are five critical KPIs every lower middle market CEO should track (plus one bonus metric that reveals a hidden threat to enterprise value).

1. EBITDA (Earnings Before Interest, Taxes, Depreciation, and Amortization)

Why it matters:
EBITDA is the most commonly used performance metric in private market transactions. It gives buyers and investors a normalized picture of your operating profitability.

Track:

  • Total EBITDA (monthly + trailing 12 months)

  • EBITDA margin (% of revenue)

  • Add-backs for one-time or discretionary expenses

2. Gross Margin

Why it matters:
Healthy gross margins are a sign of pricing power and operational efficiency. They determine how much fuel you have to invest in growth.

Track:

  • Gross margin by product or service

  • Margin trends over time

  • Key cost drivers (labor, materials, etc.)

3. Revenue Growth Rate

Why it matters:
Buyers pay premiums for predictable, scalable growth. Flat or lumpy revenue makes your company harder to value.

Track:

  • Year-over-year and month-over-month growth

  • New vs. recurring revenue

  • Revenue by customer segment or vertical

4. Working Capital Ratio

Why it matters:
Working capital affects cash flow and operational flexibility. Poor management here often leads to short-term borrowing or fire drills.

Track:

  • Current ratio (current assets ÷ current liabilities)

  • DSO (Days Sales Outstanding)

  • DIO (Days Inventory Outstanding)

  • DPO (Days Payables Outstanding)

5. Customer Acquisition Cost (CAC) vs. Lifetime Value (LTV)

Why it matters:
This metric tells you whether your growth strategy is financially sustainable.

Track:

  • CAC = (Sales + Marketing Spend) ÷ New Customers Acquired

  • LTV = Average Customer Revenue × Average Customer Lifespan

  • LTV:CAC ratio (ideal is 3:1 or higher)

Bonus KPI: Customer Churn Rate

Why it matters:
Churn silently erodes value. A high churn rate indicates customer dissatisfaction, lack of product-market fit, or over-reliance on one-time sales. It also directly undermines revenue predictability, which is a key driver of valuation.

Track:

  • Churn = Customers Lost in Period ÷ Total Customers at Start of Period

  • Churn by customer segment, product, or geography

  • Net Revenue Retention (for more complex businesses)

Pro tip:
Reducing churn by just a few points can have the same impact as doubling new customer acquisition.

Final Thoughts

Tracking the right financial KPIs does not just improve reporting. It transforms how you lead. These metrics reveal what is working, what is broken, and what buyers or investors will see when they look under the hood.

Whether you are scaling for growth or prepping for exit, our team can help you build a financial strategy that drives value and tells a compelling story.

Need help creating a custom KPI dashboard or prepping for a capital event?
Reach out through our website today. Our team of experts would love to help build your roadmap.

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