Introducing a Dow-Like Index for Entrepreneurial Businesses
At Simple Numbers, the goal was simple: develop a single metric that captures the overall health of the entrepreneurial economy.
By Brandon Gray
How do you know if entrepreneurial businesses, as a group, are truly healthy? Strong profits in one company may mask undercapitalization in another. Growth may be widespread yet returns may not be improving. One year can look good on paper but does the strength hold over time? At Simple Numbers, we have applied our newly created Business Health Score across the Simple Numbers 100, which tracks the performance of a diverse set of entrepreneurial companies, to answer those questions.
Our goal was simple: develop a single metric that captures overall health for the entrepreneurial economy. We wanted to apply the metric across time in order to track entrepreneurial businesses over time, much the way indexes track the performance of big public companies over time.
After much conversation, we decided to create the score based on a handful of metrics. These metrics encapsulate profit, growth, stability, capital position, volatility, and return. It is our belief that a useful analysis needs to incorporate all of these components, with each data point assigned a score from 1 to 100, with 100 representing the strongest performance. Below is a summary of these metrics:
Gross Margin Dollar Growth: Revenue is vanity. Are you increasing gross margin dollars? We chose gross margin dollar growth because it serves as the starting point for business health. This metric focuses on multi-year trends, not one-time wins.
Profitability Relative to Gross Margin: This metric measures how effectively a business converts gross margin into true profit. It highlights operational discipline and exposes overhead creep that revenue growth alone can hide.
Capitalization measures how many months of operating expenses a business can cover with available cash. Well-capitalized businesses make strategic decisions. Undercapitalized businesses are forced into reactive ones.
Volatility reflects how predictable results are over time. Stable profitability builds confidence and reduces stress.
Return on Investment ensures that growth efforts are actually creating value. It reinforces disciplined use of capital, time, and leadership attention.
In our analysis, each company in the Simple Numbers100 was analyzed in these areas, resulting in a Business Health Score for each company. We then combined all of the individual scores to determine the aggregate score for the SN 100 model. The last step of the analysis was to run the analysis going back to 2021 in order to see how the Health Score has been trending. Below are the Business Health Scores for each year:
2021: 59.1
2022: 54.5
2023: 54.9
2024: 52.1
2025: 49.9
If you have been following our previous articles for 21 Hats, you will not be surprised by the trend. In 2021, the entrepreneurial economy was driven by pent-up demand and consumer spending in the aftermath of the initial onslaught of Covid. In March of 2022, interest rates began to increase, and the entrepreneurial economy started to cool down. This continued through 2023. In 2024, many projects and business were put on hold until the presidential election was concluded. In April of 2025, tariffs were implemented, bringing about another downturn in performance. As you can see, the Health Scores fall right in-line with these events.
We also looked at how the Health Scored lined up with the Dow Jones Industrial Average in recent years. Below are the Dow’s end-of-year closing balances:
2021: 36,322
2022: 33,148
2023: 37,566
2024: 42,660
2025: 48,105
As you can see, the BHS and the DJIA showed a similar trend from 2021 to 2022, with both declining. While the BHS remained flat in 2023, the Dow started improving. In 2024 and 2025 the DJIA increased, while the BHS declined. Perhaps the interest rate increases, the tariffs, and inflation have affected entrepreneurial companies more than they have corporations with greater resources. In any case, this comparison confirms our belief that the performances on Wall Street and on Main Street can vary greatly.
So where do things stand now? Even with the war in Iran, the stock markets have been setting records. Our rolling data for the SN 100, however, indicates that the declines of 2024 and 2025 continued in January (48.9) and February (48.5) before ticking up in March (49.5). Of course, that one data point does not make a trend. Still, it suggests there may be cause for optimism.
Want to know your company’s Business Health Score? As you’ve seen our analysis used the metrics above to assess the entrepreneurial health of each business in the SN 100. If you’d like, we’ll do the same for you. As a 21 Hats subscriber, you can receive your Business Health Score for free. To get started, contact Brandon Gray at Brandon.Gray@simplenumberscri.com.
Brandon Gray is a partner with Simple Numbers.
