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The five questions every mid-sized business should be able to answer

Most boards can recite revenue and EBITDA. Fewer can say where margin is made, where cash sits or what breaks first. Five questions to test that.

A leadership team around a whiteboard
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Diagnostics4 min readWaterfront Advisory

Boards of mid-sized businesses are rarely short of numbers. The monthly pack often runs to forty pages. What they are short of is a handful of answers that explain how the business actually makes and loses money once product leaves the factory or the supplier. When we start work with a leadership team, we ask five questions. They are easy to state. Most teams answer two of them with confidence and estimate the rest.

Estimating has become expensive. ONS figures show producer input prices up 8.3% in the year to September 2026, while output prices rose 4.6%. Logistics UK reported vehicle operating costs up more than 12% in the year to April 2026, with diesel up 36% as disruption around the Strait of Hormuz fed through. Employer National Insurance sits at 15% above a £5,000 threshold for 2026 to 27, and the National Living Wage rose to £12.71 an hour in April 2026. When the gap between what you pay and what you charge moves this fast, averages stop protecting you.

1. Which customers and products make money after cost-to-serve?

Gross margin by SKU is not the answer. The real answer is net contribution by customer and by product family after freight, picking, order handling, returns, rebates and payment terms have been allocated to the orders that caused them. When that is done properly, the picture usually changes shape. A small group of customers carries the profit, a long middle roughly breaks even and a tail quietly consumes it.

The CFO should own this number, but finance cannot produce it alone. Operations hold the activity data: drops, lines, pallets, credit notes. A first cut from existing ERP and warehouse data takes weeks, not a system project.

2. How much cash is in stock, and how much should be?

A single inventory figure does not tell the full story. Split it into cycle stock, safety stock, excess and obsolete, by location. Then ask which policy created each bucket.

This matters now because the reasons for holding stock are changing substantially. Many businesses added weeks of buffer when container lines diverted around the Cape. Seatrade Maritime reported in October 2026 that Suez transits had recovered to more than half of pre-war levels, with Linerlytica expecting a full return by the first quarter of 2027. Shorter transit times mean less stock on the water and less safety stock needed to cover variability. If nobody revisits the parameters, the buffer stays blocked and so does the cash.

3. What happens if your biggest supplier or lane stops for six weeks?

A colour-coded risk register does not really answer this on its own. It needs to capture the single points of failure, the revenue that depends on each and the realistic time to recover. Most mid-sized businesses have three or four parts to the answer: a sole-source component, one port of entry, one carrier on a key lane, and a planning process that lives in one person's spreadsheet.

The good news is that you do not need to fix all of them. But you definitely need to know which ones would hurt and decide, deliberately, which to insure against with dual sourcing or stock and which to accept.

4. How much of your list price do you actually keep?

McKinsey's pricing research found that for an average S&P 1500 company, a 1% price increase with stable volumes lifts operating profit by 8%. The reverse holds too. Yet few mid-sized firms can say how much of their list price survives on-invoice discounts, retrospective rebates, free delivery, settlement discounts and promotional support. These sit in different budgets, are agreed by different people and are rarely added up per customer.

The commercial director should own price realisation, with finance providing the waterfall. Expect the first version to be uncomfortable.

5. What will customers and regulators ask about your carbon footprint?

Even if your business falls outside the EU's revised sustainability reporting rules, your larger customers may not. Under the Omnibus changes, companies with fewer than 1,000 employees can decline value chain data requests that go beyond a voluntary standard, and that cap applies to larger reporters from financial year 2027. While that narrows what can be demanded, it does not stop customers choosing suppliers who can answer.

CDP and BCG found that reported supply chain emissions were on average 26 times companies' operational emissions. For most businesses, the largest sources of emissions are purchased materials, freight and packaging, which are also among the largest costs. A carbon baseline built from spend data is a good map of where cost reduction will come from.

Being able to answer all five with numbers does not make a business safe. It does mean the board is arguing about choices rather than about facts. If you can only start on one, start with the first. It usually funds the rest.

Our free Margin Diagnostic is a quick way to test how well you can answer the first question today.

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