Startup Metrics: 12 important KPI's to track – A founders guide
As a startup founder, you have a lot on your plate. Not only do you have to worry about building and launching your product, but you also have to grow your business. And in order to do that, you need to track the right startup metrics.
As a startup founder, you have a lot on your plate. Not only do you have to worry about building and launching your product, but you also have to grow your business. And in order to do that, you need to track the right startup metrics.
But with so many different metrics out there, it can be difficult to know which ones are actually worth tracking. That's why we've put together this guide on the key startup metrics that you should be tracking.
12 key metrics to track for startups
Customer Acquisition Costs (CAC)
Your customer acquisition costs are the amount of money that you spend in order to acquire new customers. This metric is important because it allows you to track how efficient your marketing and sales efforts are. If your CAC is too high, it means that you're spending too much money to acquire new customers. And if it's too low, it could mean that you're not spending enough to reach new customers.
Churn Rate
Churn rate is the percentage of customers who cancel their subscription or stop using a service within a given time period. It's a key metric for businesses that rely on recurring revenue, such as subscription-based businesses and software-as-a-service (SaaS) companies. A high churn rate can have a significant impact on a business, as it can lead to lost revenue and decreased growth. In correlation with churn, many businesses also track customer retention rate. In order to keep track on churn you need to constantly do churn analysis and track how it develops over time.
Average order size
The average order size is the average amount of money that your customers spend when they make a purchase from your business. This metric is important because it allows you to track the health of your business. If your average order size is too low, it could mean that you're not generating enough revenue per customer.
Monthly Recurring Revenue (MRR)
Your monthly recurring revenue is the amount of money that you can expect to generate from your customers on a monthly basis. This metric is important because it allows you to track your growth and predict your future revenue.
Annual Run Rate (ARR)
Your annual run rate is the amount of money that you can expect to generate from your customers on an annual basis. This metric is important because it allows you to track your growth and predict your future revenue.
Cash Runway
Your cash runway is the amount of time that you have to achieve profitability before your startup runs out of money. This metric is important because it allows you to track your progress and make sure that you're on track to achieve profitability.
Burn Rate
Your burn rate is the rate at which your startup is spending money. This metric is important because it allows you to track your progress and make sure that you're on track to achieve profitability.
K-factor
Virality is the key to any startups success. If we look at a project as a model that turns an influx of people into revenue, virality allows us to get money from users without spending anything on acquisition. Plus, strong virality can help aproject take over its market in just a few months: one active user invites several friends, each of whom invite a couple more friends, and so on.
Your k-factor is the rate at which your startup is growing organically by word of mouth. This metric is important because it allows you to track your progress and make sure that you're on track to achieve profitability.
Gross sales
The gross sales is the total amount of revenue that your startup generates. This metric is important because it allows you to track your progress and make sure that you're on track to achieve profitability.
Monthly active users (MAU)
Your monthly active users is the number of people who use your product or service on a monthly basis. This metric is important because it allows you to track your progress and make sure that you're on track to achieve profitability.
NPS/Product market fit
Your NPS (Net Promoter Score) is a measure of how likely your customers are to recommend your product or service to their friends or family. This metric is important because it allows you to track your progress and make sure that you're on track to achieve virality and that your customers are willing to pay for what you are selling
CAC/LTV ratio
For any professional startup founder, the LTV/CAC ratio is a crucial metric to track in order to determine the sustainability of their business. It represents the relationship between the lifetime value (LTV) of a customer and the cost of acquiring that customer (CAC). This ratio is a measuring stick of the company's sales and marketing performance; a high ratio indicates that the company is efficiently acquiring customers, while a low ratio is a warning sign of unsustainable business practices.
Of course, these are not the only metrics you should track when building a startup. However, these are some of the most important metrics to keep an eye on. By tracking these data points, you can get a clear picture of how their product and marketing machinery is performing and make necessary changes to improve user experience. If you are a SaaS buisniess you can also read more on our guide on SaaS metrics.
Using KPI's and startup metrics to make strategic decisions
A key performance indicator (KPI) is a metric used to evaluate progress towards a company's goals. In the early stages of a startup, it can be difficult to know which KPIs to track. However, by taking a strategic approach, startups can make data-driven decisions that will help them achieve their long-term objectives.
One way to select the right KPIs is to start by identifying the company's core values. What are the most important things that the company wants to achieve? Once these values have been identified, they can be used to guide the selection of KPIs. For example, if one of the company's core values is innovation, then a KPI related to the rate of new product development would be an important metric to track.
Another important consideration when choosing KPIs is to make sure that they are actionable. A KPI should not simply be a number; it should be something that can be changed or improved upon through specific actions. For example, tracking customer satisfaction levels is an actionable KPI because it can be directly influenced by the quality of service that a company provides. By contrast, tracking total revenue is not as actionable because there are many factors that affect revenue and it may not be possible for a startup to directly impact all of them.
The final consideration when choosing KPIs is to ensure that they are aligned with the company's overall strategy. In other words, each KPI should be helping to move the company closer to its goals. For example, if a startup's goal is to become profitable within two years, then a KPI related to profitability would be more relevant than one related to customer satisfaction levels.
By taking a strategic approach to selecting KPIs, startups can make data-driven decisions that will help them achieve their long-term objectives.
Picking your main startup metrics
As a startup, it's important to have a clear understanding of your business goals and the key performance indicators (KPIs) that will help you measure progress. However, it's also important not to get bogged down in tracking too many KPIs. Too much data can be overwhelming and difficult to interpret, making it hard to identify what's working and what needs to be improved.
Instead, focus on a few key metrics that are most relevant to your business. Make sure you track these KPIs over time so you can see how your business is performing and make necessary adjustments. By keeping your data focused and actionable, you'll be able to make better decisions for your startup.
Most startups have different analytics tools to capture and measure their product, marketing and sales metrics. But it's hard to get an holistic overview of them all in one place. For that purpose, we build Gilion's platform. Our analytics tool where you can connect your current analytics tools and instantly get an overview of all me most important metrics for your app or SaaS business.
Gilion draws on all data that’s ever related to your growth - operational costs, acquisition metrics, cohort metrics, LTV metrics. No cost is left out, essentially merging the growth models of your CFO, marketing and sales team into a complete and unbiased one.
It keeps track of all the alternating variables - efficiency trends, seasonal trends, customer behaviour trends - and connect them all the way down to a 5-year cash position forecast. This means always-on forecasting, so you place every bet with surgical precision.
Common questions on startup metrics
How are you choosing the right metrics to track for your startup?
There's no one-size-fits-all answer to this question, as the right metrics to track will vary depending on your business goals and objectives. However, there are some general guidelines you can follow to help you choose the right metrics for your startup.
First, start by identifying your core values. What are the most important things that you want your startup to achieve? Once you've identified your core values, you can use them to guide your metric selection. For example, if one of your startup's core values is innovation, then a metric related to the rate of new product development would be an important metric to track.
Second, make sure your metrics are actionable. A metric should not simply be a number; it should be something that you can change or improve upon through specific actions. For example, tracking customer satisfaction levels is an actionable metric because it can be directly influenced by the quality of service that you provide. By contrast, tracking total revenue is not as actionable because there are many factors that affect revenue and it may not be possible for you to directly impact all of them.
Finally, ensure that your metrics are aligned with your startup's overall strategy. In other words, each metric should be helping you move closer to your business goals. For example, if your startup's goal is to become profitable within two years, then a metric related to profitability would be more relevant than one related to customer satisfaction levels. By taking a strategic approach to selecting metrics, you can make data-driven decisions that will help your startup achieve its long-term objectives.
How do you know if you're on the right track with your metrics?
There's no easy answer to this question, as it can be difficult to know whether or not your metrics are truly effective. However, one way to gauge the effectiveness of your metrics is to see how they compare to industry benchmarks. If your metrics are significantly higher or lower than similar startups in your industry, then it may be an indication that you need to adjust your metric selection.
Additionally, you can also ask yourself whether or not your metrics are helping you make progress towards your business goals. If they're not, then it may be time to reconsider which metrics you're tracking. The bottom line is that there's no perfect formula for choosing startup metrics.
However, by taking a strategic and thoughtful approach, you can ensure that you're tracking the right metrics for your business. By doing so, you'll be able to make better decisions that will help your startup succeed.
Are there any dangerous traps that can trip up startups when it comes to tracking metrics?
There are a few potential dangers that startup founders need to be aware of when tracking metrics. First, it's important to make sure that you're not fixated on short-term gains at the expense of long-term growth.
For example, if your startup is focused on becoming profitable within two years, it would be easy to become too focused on short-term revenue growth and cut corners in other areas, such as product development or customer service. While it's important to track metrics related to profitability, you shouldn't sacrifice long-term growth in pursuit of short-term gains. Beware of the "vanity metric" trap. A vanity metric is a metric that makes you feel good but doesn't actually provide any valuable insights. For example, tracking the number of website visitors is a vanity metric because it doesn't tell you anything about whether those visitors are actually interested in your product or service.
As a general rule, you should avoid tracking any metrics that don't directly contribute to your business goals. Don't forget that metrics are only one piece of the puzzle. While they can be helpful in making data-driven decisions, they should never be used as the sole basis for decision-making. Instead, use them in conjunction with other factors, such as your startup's overall strategy and your gut instinct.