ETA Metrics That Matter: DSO, Retention, OTIF (Simple Guide)

When you're running a small business, metrics can feel overwhelming. There are dozens of things you could track. But in practice, most value creation comes from watching a handful of metrics closely and fixing what's broken.

For operators in B2B services and light manufacturing, three metrics matter most: DSO (Days Sales Outstanding), customer retention, and OTIF (On-Time In-Full delivery).

These aren't flashy. They're operational. But they directly impact cash flow, client satisfaction, and margin—which means they directly impact valuation.

DSO (Days Sales Outstanding): How fast you collect cash

What it is:

DSO measures how long it takes, on average, to collect payment after you've invoiced a client.

Formula: (Accounts Receivable / Revenue) × Days in Period

Example: If you have €50k in receivables and €300k in quarterly revenue, your DSO is (50,000 / 300,000) × 90 = 15 days.

Why it matters:

DSO directly impacts your cash position. If you're waiting 60 days to collect payment, that's 60 days where you're funding operations out of pocket. Tighten DSO by 10 days and you free up working capital without borrowing or raising prices.

What good looks like:

• B2B services: 30-45 days is typical in Europe
• Light manufacturing: 30-60 days depending on contract terms
• Red flag: DSO creeping upward quarter over quarter

How to improve it:

• Invoice immediately (not at month-end)
• Follow up on overdue invoices within 7 days
• Offer small discounts for early payment (1-2% for payment within 10 days)
• Automate reminders (most accounting software can do this)

If you cut DSO from 45 days to 30 days on €1M in annual revenue, you free up roughly €40k in cash. That's money you can reinvest or use to reduce debt.

Customer retention: How many clients stay year-over-year

What it is:

Customer retention measures the percentage of clients who continue doing business with you from one period to the next.

Formula: (Clients at End - New Clients) / Clients at Start × 100

Example: Start with 50 clients, add 10 new ones, end with 55. Retention = (55 - 10) / 50 = 90%.

Why it matters:

Retention is the clearest signal of service quality and pricing power. High retention means clients see value. Low retention means you're constantly replacing lost revenue—which is expensive.

What good looks like:

• Excellent: 90%+ annual retention
• Good: 80-90%
• Warning: Below 80% (you're losing clients faster than you should)

How to improve it:

• Track churn by cohort (which clients left, and why?)
• Proactively check in with at-risk clients (e.g., usage dropped, complaints increased)
• Fix service issues before clients leave (most churn is avoidable if you catch it early)
• Segment your book: protect your top 20% of clients at all costs

A 5-point improvement in retention (from 85% to 90%) can increase lifetime customer value by 30-50%. That flows directly to valuation.

OTIF (On-Time In-Full): How reliably you deliver

What it is:

OTIF measures the percentage of orders delivered on time and in full—exactly as promised.

Formula: (Orders Delivered On-Time & In-Full / Total Orders) × 100

Example: You shipped 95 orders last month. 90 arrived on time and complete. OTIF = 90 / 95 = 94.7%.

Why it matters:

OTIF is a direct measure of operational reliability. Clients care about one thing: Can you deliver what you promised, when you promised? High OTIF builds trust. Low OTIF erodes it—and drives churn.

What good looks like:

• World-class: 95%+
• Good: 90-95%
• Problem: Below 90% (clients are noticing)

How to improve it:

• Track OTIF weekly (not monthly—by then it's too late to fix)
• Identify root causes of delays (supplier issues, internal bottlenecks, bad forecasting)
• Set internal deadlines ahead of client deadlines (buffer for mistakes)
• Communicate proactively when delays happen (clients forgive honesty, not silence)

Improving OTIF from 88% to 95% can reduce complaints, improve retention, and create space for price increases. Clients will pay more for reliability.

Why these three metrics compound

The beauty of DSO, retention, and OTIF is that they reinforce each other:

• Better OTIF → higher retention (clients stay because you're reliable)
• Higher retention → more predictable cash flow (less churn = less volatility)
• Faster DSO → more cash to invest (which you can use to improve OTIF or retain key clients)

Track these three metrics weekly. Review them with your team. Fix what's broken. Over 12-18 months, the cumulative impact is significant.

What this means for buyers

When evaluating a business, operators look at these metrics to gauge operational health:

• DSO creeping up? Suggests weak collections or deteriorating client creditworthiness.
• Retention below 85%? Suggests service issues or pricing misalignment.
• OTIF below 90%? Suggests operational bottlenecks that will require fixing.

If all three metrics are strong (DSO under 40 days, retention above 90%, OTIF above 93%), you're looking at a well-run business. That commands a premium.

If one or more are weak, they become value-creation levers. Fix them in the first 6-12 months and you've built a better, more valuable business.

Want more on operational metrics that move value? I write practical notes on running and improving SMEs—focused on what actually works.

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