How this shows up in interviews — Business acumen: how your buyer's company actually works

1. "Walk me through how a company makes money." Go down the P&L in order, attaching meaning to each line. Then add what marks you out — profit is not cash, because accounts use the accruals basis and growth absorbs cash into working capital — and finish with the consequence: which is why billing frequency and payment terms are commercial levers, not paperwork.

2. "What's the difference between capex and opex, and why would a customer care?" Different budgets, different approvers, different cash limits — hard-separated in the public sector as CDEL and RDEL. Then the nuance that shows depth: opex is not automatically cheaper, since a three-year subscription can hit the annual P&L harder than depreciating a purchase, and under IFRS 16 leasing no longer reliably converts capital spend into revenue spend in the NHS.

3. "How would you research one of our target accounts before a first meeting?" Name the sources: Companies House filing history, charges and free follow alerts; the strategic report's principal risks section; published board papers for an NHS trust; job adverts as approved budget. Then what you'd do with it — convert findings into two or three hypotheses and open with one as a question, not a recital.

4. "Our CFO says our CAC payback is too long. What does that mean, and what would you do?" Define it — months of gross profit needed to recover acquisition cost, and a risk measure rather than a return measure. Work it aloud: £60k ACV at 81% margin is £4,050 a month, so £70k CAC gives 17.3 months; a 15% discount takes it to 20.3. Your levers: hold price and trade non-price terms, sell multi-year and annual-in-advance, and qualify harder.

5. "Explain the rule of 40. Is it a good metric?" State it, credit Feld's 2015 post relaying a late-stage investor's heuristic, apply it to a number. Then earn the marks: "profit" is undefined; growth and margin are not interchangeable; it was not designed for early-stage companies; it ignores retention.

6. "A prospect says they have no budget. What do you actually do?" Separate what that sentence can mean: no money anywhere (rare), none in this budget line (common), none this year (very common). Then work the mechanics — whose budget, what approval limit, when the planning cycle runs, whether a reforecast can move underspends. Add the qualification test: if the problem isn't worth funding at the next planning round, it may not be a real problem.

7. "How would you help a champion build a business case?" Name the components — problem, options including do-nothing, full TCO, benefits split cash-releasing from non-cash-releasing, appraisal, risks, plan — and the measures with their limits: payback is blind after the payback point, ROI is meaningless without a stated period, NPV is most rigorous and the public sector discounts at 3.5%. Add the Five Case Model and the separate tests of value for money and affordability. Close on survivability: a defensible £300k case beats a fragile £2m one.

8. "What's financially different about selling to an NHS trust?" Cost centre versus profit centre is the headline: income comes largely through the NHS Payment Scheme rather than from selling more, so a trust cannot grow its way out of a cost and benefits must usually be cash-releasing. Add capital scarcity under CDEL, the 3.5% PDC dividend, the statutory break-even duty, the April–March year, and the procurement thresholds that set the timeline.

Cheat sheet

The P&L: Revenue − cost of sales = gross profit (÷ revenue = gross margin). − operating expenses = operating profit / EBIT (÷ revenue = operating margin). − interest − tax = profit after tax. EBITDA = EBIT + depreciation + amortisation. Leverage rule: at 6.25% operating margin, £1 of cost saved ≈ £16 of new revenue (1 ÷ operating margin).

Cash ≠ profit. Accruals basis; growth absorbs cash into working capital (receivables + inventory − payables). DSO = (receivables ÷ revenue) × 365 → £1.6m on £8m = 73 days. Worked case: £300k profit, £300k cash decrease.

Capex vs opex: capex = life >1 year, capitalised, depreciated, separate cash-limited budget; opex = running cost, expensed now, departmental budget. A different budget, not a lower price — £300k over 5 years = £60k/yr vs a 3-year subscription at £100k/yr. IFRS 16 (NHS from 1 Apr 2022): leases score against capital.

Research: Companies House (filing history, charges, free follow alerts; small companies file filleted accounts — no P&L until April 2028) · principal risks section of the strategic report (s414C) · NHS trust board papers · job adverts = approved budget. Hypotheses and questions; never recite.

SaaS: MRR × 12 = ARR; bookings ≠ billings ≠ revenue ≠ cash. Gross margin ~77% total / 81% subscription / ~30% services. CAC payback = CAC ÷ monthly gross profit — median 16 months, top quartile ≤6, bottom ≥24; Skok: LTV:CAC ≥ 3, payback ~12 months. GRR excludes expansion (≤100%); NRR includes it. 2% monthly churn = 21.5% a year; 1% = 11.4%. Rule of 40 = growth % + profit % ≥ 40 (Feld, 2015) — but "profit" is undefined, growth ≠ margin, retention ignored, not for pre-scale. Memorise: £60k ACV, 81% margin, £70k CAC → 17.3 months; add a 15% discount → 20.3 months.

Budgets: strategy → build → challenge → allocate → in-year → reforecast; the easy windows are build and reforecast. Know budget holder vs approver (scheme of delegation) vs signatory. Public sector splits CDEL from RDEL; use-it-or-lose-it is real at cost-centre level, softened above it. Dates: NHS year 1 Apr – 31 Mar → Oct–Jan is the window; large western pharma = calendar year; Takeda, Astellas, Daiichi Sankyo = April–March.

Procurement thresholds from 1 Jan 2026 (VAT-inclusive): central government goods/services £135,018 · sub-central incl. NHS trusts £207,720 · works £5,193,000 · light touch £663,540. Value includes options and extensions. Never advise on avoiding a threshold. Healthcare services → Provider Selection Regime; software and goods → Procurement Act 2023.

Business case: problem · options incl. do nothing · full TCO · benefits split cash-releasing vs non-cash-releasing · appraisal · risks · plan. Public sector: Five Case Model, SOC → OBC → FBC, value for money and affordability as separate tests. On £150k cost, £80k net benefit/yr × 3: payback 1.9 years · ROI 60% / 3 years · NPV at 3.5% ≈ £74,000.

Life sciences: NHS trusts are cost centres; income via the NHS Payment Scheme, so more activity ≠ more money and benefits must usually be cash-releasing. PDC dividend 3.5% of average relevant net assets; statutory break-even duty. Pharma: brands are profit centres, R&D and medical affairs cost centres, with compliance-mandated budget walls; GxP validation belongs in TCO. Biotech: runway = cash ÷ burn (£6m ÷ £400k = 15 months).

Credibility rules: never invent a number · never give accounting, tax or legal advice · never bluff a term. "I don't know — I'll find out and come back to you by Thursday" beats every alternative, provided Thursday happens.

References & further reading

Karen Berman & Joe Knight (with John Case), Financial Intelligence — the standard primer for non-financial managers, and the clearest explanation of why profit is an estimate while cash is a fact. If you read one book here, read this.
Ram Charan, What the CEO Wants You to Know — every business reduced to cash generation, margin, velocity, growth and customers; the best text for acquiring the instinct.
David Skok, SaaS Metrics 2.0 (forEntrepreneurs, https://www.forentrepreneurs.com/saas-metrics-2/) — the canonical free reference on CAC, LTV, churn and the cash-flow trough.
Dave Kellogg, "CAC Payback Period: The Most Misunderstood SaaS Metric" (Kellblog, 17 March 2016, https://kellblog.com/2016/03/17/cac-payback-period-the-most-misunderstood-saas-metric/) — why payback is a risk metric, and how it is routinely miscalculated.
Brad Feld, "The Rule of 40% For a Healthy SaaS Company" (Feld Thoughts, 3 February 2015, https://feld.com/archives/2015/02/rule-40-healthy-saas-company/) — the original post; the rule's later reputation as a law is not Feld's doing.
HM Treasury, The Green Book (2026 edition, 5 February 2026, gov.uk) — the Five Case Model, the 3.5% social time preference rate, and the value-for-money/affordability distinction.
Healthcare Financial Management Association, Introductory Guide to NHS Finance (hfma.org.uk) — for non-accountants; the fastest route to CDEL and RDEL, the PDC dividend and break-even duties.
Companies House, Find and update company information (find-and-update.company-information.service.gov.uk) — free, and the single most useful research tool for UK private companies.