UK Business Reality Check
By Omair SaoLast reviewed — free tool for UK SMEs, agencies, consultants and service businesses. See how we check our figures.
Busy but always skint? Enter your monthly numbers and see the full picture: your true profit after paying yourself properly, your real owner hourly rate, how many months of cash runway you actually have — and which 3 or 4 changes would help the most.
This tool provides estimates for planning purposes only. Figures are based on the inputs you provide and simplified cashflow modelling. It does not constitute financial, accounting, or tax advice. For accurate business forecasting, consult a qualified accountant or CFO.
Why "True Profit After Owner Pay" Is the Number That Matters
Most small business owners look at their bank balance or their accountant's profit figure and assume the business is working. But both of those numbers can mislead. A bank balance reflects cash timing — money that arrived this month from last month's work. An accountant's profit figure typically does not account for the owner's market-rate labour cost, because most directors draw a low salary and top up with dividends.
The honest question is: if you hired someone to replace you at a proper market rate, would this business still make money? For many owner-managed businesses, the answer is no — the owner is effectively subsidising the business with their time, carrying full business risk, while earning less per hour than they would in employment.
Accounting profit
misleadingWhat the P&L shows — often excludes owner pay or uses a token salary
Operating surplus
usefulWhat the business generates after all costs, before the owner takes anything
True profit
keyWhat remains after a proper owner salary — the only number that tells the real story
Understanding Cash Runway and Burn Rate
Cash runway is how many months of operations you could fund with your current bank balance if revenue stopped tomorrow. Burn rate is how much cash you consume each month net of what you actually receive. Note: burn rate is based on cash received, not invoiced — if clients take 60 days to pay, your effective monthly inflow is significantly less than your invoiced revenue.
| Runway | Status | What to do |
|---|---|---|
| Under 1 month | 🔴 Critical | Emergency action — cut costs and chase all outstanding invoices immediately |
| 1–3 months | 🔴 Danger Zone | Urgent — focus on revenue growth or cost reduction within 4 weeks |
| 3–6 months | 🟡 Watch Closely | Concerning — implement improvements now before the situation deteriorates |
| 6–12 months | 🟢 Comfortable | Healthy buffer — invest in growth, but maintain discipline |
| 12+ months | 🟢 Strong | Very healthy — consider whether cash could be put to better use |
| Cash positive | 💙 Generating Cash | Spending less than you earn — keep building the reserve |
Who This Calculator Is For
This tool is built for service-led UK businesses where the owner's time is a core part of the value delivered — and where cashflow management matters day-to-day. It works best for:
Agencies & consultancies
Marketing, PR, digital, design, IT, management consulting — where billable hours and utilisation drive profitability
Trades & contractors
Builders, electricians, plumbers, heating engineers — where job pricing and materials costs affect margin
Freelancers going limited
Sole traders and limited company owners who need to understand if their business model is financially sustainable
Service SMEs (1–50 staff)
Owner-managed companies in facilities, recruitment, professional services, or any people-led business
The calculator is less suited to product-led businesses with complex inventory or FMCG, seasonal businesses with highly variable monthly revenue, or VC-backed startups with sophisticated financial modelling needs.
How the "Levers to Pull" Section Works
The levers section runs automatic simulations behind the scenes — testing what happens to your cash runway if you raise prices by 10% or 20%, cut overheads by £500 or £1,000 per month, reduce debtor days by 15 or 30 days, or improve utilisation. Each result is expressed as additional months of runway gained, and the levers are ranked from most impactful to least.
A common finding is that a modest price rise adds more runway than a significant cost cut. That is because revenue improvements compound — each extra pound of revenue also improves gross margin — whereas cost cuts are one-dimensional. The other frequent result is that faster client payments outperform both, because the cash is already earned and just needs to arrive sooner.
Who this business reality check is for
- Owners of agencies, consultancies, trades and other service businesses who see money coming in but are never sure whether the business actually makes a profit once they pay themselves.
- Freelancers deciding whether to take on staff or an office, who need to know their true hourly rate before committing to fixed costs.
- Business owners with slow-paying clients who want to see how debtor days turn a profitable business into one that runs out of cash.
- Anyone preparing for a difficult conversation with a bank, an accountant or a co-founder and wanting the numbers laid out plainly first.
How the business reality check works
- 1
Separate revenue into recurring and project income
Retainers and subscriptions are treated as dependable; project revenue is what the worst-case scenario assumes you could lose. The two together are your monthly revenue.
- 2
Deduct costs in layers
Direct costs (materials, subcontractors, freelancers) come off first to give gross profit and gross margin. Staff costs, overheads and loan repayments come off next to give the operating surplus. Finally the owner's target salary comes off to show true profit: what the business earns after paying you a proper wage.
- 3
Convert your hours into an hourly rate
Your weekly hours are converted to a monthly figure and divided into the operating surplus, so you can see what the business really pays you per hour and compare it with the target salary you typed in and with what you would earn as an employee.
- 4
Adjust cash inflow for how slowly clients pay
Revenue is not cash. The calculator scales monthly cash inflow down according to your average debtor days, then compares it with total monthly outgoings including your own pay to get the monthly burn (or surplus).
- 5
Run three scenarios and rank the levers
Best case adds 5% to revenue, worst case removes 15%, and each gives a cash runway in months from the cash you hold. The final section tests specific actions (a 10% price rise, 15 fewer debtor days, £500 or £1,000 of overhead cuts) and ranks them by how much runway they buy.
Worked example
A small agency turning over £15,000 a month
£9,000 of retainers and £6,000 of project work. Direct costs £3,500, one member of staff at £4,000, overheads £2,200, loan repayments £600, an owner who wants £3,500 a month and works 50 hours a week, £18,000 in the bank, clients paying in 45 days, and 110 billable hours out of a 160-hour capacity.
| Gross profit76.7% gross margin | £11,500 |
| Operating surplus before owner pay | £4,700 |
| True profit after £3,500 owner salary | £1,200 |
| Owner's real hourly rate£4,700 ÷ 216.5 hours a month | £21.71 |
| Utilisation110 of 160 billable hours | 69% |
| Effective monthly cash inflow at 45 debtor days | £13,500 |
| Monthly outgoings including owner pay | £13,800 |
| Expected cash runwayBurning £300 a month from £18,000 | 60 months |
| Worst-case runway (revenue down 15%)Burning £3,133 a month | 5.7 months |
Result: On paper the business makes £1,200 a month after paying the owner, but slow-paying clients mean it is quietly losing £300 of cash a month, and one lost project client would give it under six months. Any one of a 10% price rise, 15 fewer debtor days or £500 of overhead savings turns it cash-positive.
Figures use the 2026/27 rates and rules described above, are rounded to the nearest pound, and were last checked against GOV.UK on 25 September 2026.
Assumptions and limitations
- All figures are monthly averages. Seasonal businesses should run the calculator for a quiet month and a busy month separately.
- The owner's target salary is treated as a cost so that true profit reflects a market rate for your own work. Tax on that salary is not modelled; use the salary vs dividend or take-home pay calculators for that.
- Debtor days reduce cash inflow using a simple collection factor. A business with a few very late payers can be worse off than the average suggests.
- The best and worst cases flex revenue only (+5% and −15%). Costs are assumed fixed in the short term, which is usually true of staff, rent and loans.
- Runway assumes no new borrowing, no capital injection and no change in behaviour. It is a warning light, not a forecast.
- VAT is excluded: enter figures net of VAT, and remember that VAT collected from customers is not your money.
Official sources
The figures used by this calculator come from the following official pages. Read how we check our figures.
- Cash flow forecasting — HMRC and Companies House guidance via GOV.UK — Government support for small business finance
- Late commercial payments: charging interest and debt recovery — GOV.UK — Your rights when clients pay late
- Prompt Payment Code — Office of the Small Business Commissioner — Standards large customers sign up to
- Business support helpline — GOV.UK
Further reading on IncomeFix
Related Tools for Business Owners
Frequently Asked Questions
What is true profit for a small business?
True profit is what remains after all costs — including a proper market-rate salary for the business owner. Most profit figures reported by small businesses exclude the owner's labour cost, which makes the business look more profitable than it really is. If you removed yourself and hired someone to do your job, what would it cost? True profit is what is left after that.
What is a healthy cash runway for a UK SME?
Most business advisers recommend a minimum of 3 months' cash runway at all times, with 6 months as a comfortable buffer. Under 3 months is a danger zone where a single slow-paying client or unexpected cost could cause a cash crisis. 6-12 months provides breathing space to invest, hire, or navigate a downturn without panic.
How do I calculate my true hourly rate as a business owner?
Divide the operating surplus (revenue minus all costs, before your pay) by the number of hours you work per month. For example: if your business generates £4,000 operating surplus and you work 50 hours per week (217 hours per month), your true owner hourly rate is around £18.40/hour. This is often significantly lower than business owners expect — especially when they include unpaid evenings and admin time.
What is burn rate and how is it calculated?
Burn rate is how much cash your business consumes each month, taking into account both outgoings and the actual cash that arrives (which may be less than invoiced if clients pay slowly). Monthly burn = total outgoings minus effective cash received. Cash runway = current bank balance divided by monthly burn. If your business is generating more cash than it spends, burn rate is zero and you are cash positive.
Why does the calculator use 3 scenarios instead of just one?
A single forecast creates a false sense of precision. Business owners need to know their position under realistic optimism (clients pay on time, target utilisation), their most likely outcome (current actual performance), and a stress test (revenue falls, payments slow, an unexpected cost hits). The three-scenario model shows how resilient — or fragile — the business really is.
What are debtor days and why do they matter?
Debtor days measure how long clients typically take to pay your invoices. If you invoice £10,000 per month on 60-day terms, roughly £20,000 is always tied up in unpaid invoices — cash you have earned but cannot yet spend. Reducing debtor days from 60 to 30 can immediately release £10,000 of cash without any additional revenue growth.
What is billable utilisation and what rate should I target?
Billable utilisation is the percentage of your available working time (or your team's time) that is actually billed to clients. Agencies and consultancies typically target 65-80% for individuals. Below 60% usually means the business has a pricing or pipeline problem, not a cost problem. Above 85% often signals underpricing or that you are at capacity and should raise rates.
How is this different from a standard profit and loss statement?
A standard P&L shows accounting profit, which often excludes the owner's market-rate salary and uses accrual accounting (recording income when invoiced, not when paid). This calculator shows cash-based true profit including realistic owner pay, models the actual cash that arrives based on payment speed, and runs stress tests — giving a more honest picture of whether the business is genuinely working for the owner.