Key Metrics For Startups To Measure Success
Startup Metrics infographic comes from Funders and Founders and information designer Anna Vital, and it lists the important metrics to gauge traction and success of new startups.
You can’t improve what you don’t measure. Implementing metrics at your startup is a surefire way to bring focus to your entire organization. Metrics are vital to track in every aspect of a startup but especially important when it comes to sales. Generally speaking sales metrics can be measured on an individual, team, or organization basis.
One of the greatest things about putting in place the right metrics is that showing them to people will automatically change their behavior to try to improve the metrics. Furthermore, the metrics make it clear what levers they can use to change performance.
When having a startup company, it’s very important to monitor the things that are working and those that aren’t. This might be the trickiest and less attractive part of running a startup, but it’s definitely a very very important one. If we don’t know where to focus our efforts and where to stop focusing them, we would just get tired and get no success in return whatsoever.
Only one out of ten startups manages to succeed. However, this does not mean that nine out of ten ideas are bad. In most cases, failure is due to an ill-defined goal and insufficient focus on metrics that measure how the idea is working towards its goal.
Metrics are a measurement system of a product’s evolution towards its goal. They let you understand the product success consisting of how users use your product, how much product brings in revenue, and what makes users particularly happy about your product.Startup metrics and key performance indicators (KPIs) are important to understand and keep track of so your startup can measure, analyze, and grow your business using data, rather than blindly trying to grow.
But not all key performance indicators were created equal. And not all KPIs that are applicable to different types of startups are the right match for your startup. That’s why it’s important to use the right metrics to measure performance.
When you collect proper metrics, you get an optimized picture of your product, and the decision on what to do further becomes evident. Traditionally, data is divided into several types depending on the focus area like finances, customer engagement, marketing, and so on. If your aim is to understand how to scale profitably, you should take advantage of financial metrics for startups including the recurring and/or total revenue, lifetime value, customer acquisition cost, etc. Customer engagement metrics include monthly active users, churn rate, downloads and others.
List of Startup KPIs and Startup Metrics
There are quite a lot of key performance indicators that can be used to measure startup performance.
Below, you’ll find more than the 34 types of startup metrics as shown in the infographic and what each KPI means.
1) MRR (Monthly Recurring Revenue) = The amount of revenue you make that recurs monthly
2) ARR (Annual Recurring Revenue) = The amount of revenue you receive that recurs yearly
3) ARPA (Annual Revenue per Account) = MRR / Total # of Customers
4) Gross Profit = Total revenue minus the cost of goods sold
5) TCV (Total Contract Value) = Value of one-time and recurring charges
6) ACV (Annual Contract Value) = The value that a contract will bring to your business annually
7) LTV (Lifetime Value) = Prediction of the net profit from the entire future relationship with a customer
8) Deferred Revenue = Amount that was received by a company in advance of earning it
9) Billings = Current quarterly revenue + deferred revenue from the previous quarter
10) CAC (Customer Acquisition Cost) = How much it costs, on average, to acquire a customer
11) CCR (Customer Concentration Risk) = Revenue from largest customer / total revenue
12) DAU (Daily Active Users)= The number of users that return to your startup’s site or app on a daily basis
13) MAU (Monthly Active Users) = The number of users that return to your startup’s site or app on a monthly basis
14) Number of Logins= The amount of times users have logged in to your portal
15) Activation Rate = Number of users taking a specific action to get value out of a product
16) MoM (Month-on-Month Growth)= The rate of growth from month to month, comparing the the current month or past 30 days to the previous month or last 31 to 60 days.
17) CMGR (Compounded Monthly Growth Rate) = (Latest Month/First Month) ^ (1 / # of Months) — 1
18) MCR (Monthly Churn Rate) = Lost customers this month / prior month total
19) Retention by Cohort = % of original installed base (1st month) that are still transacting
20) GCR (Gross Churn Rate) = MRR lost in a given month / MRR at the beginning of the month
21) Net Churn = (MRR lost — MRR from upsells) this month / MRR at the beginning of the month
22) Monthly Cash Burn Rate = How much money you spend per month (gross)
23) Net Burn Rate = Revenues — gross burn
24) Gross Burn = Monthly expenses + any other cash outlays
25) TAM (Total Addressable Market) = Revenue opportunity available for a product
26) ARR (Annual Run Rate) = Projection of current MRR into the future, annualized
27) Gross Margin = Difference between revenue and cost of goods sold
28) Sell-Through Rate = Number of units sold in a period/number of items at the beginning of the period
29) Network Effects = Effect of one user on the value of that product to other people (example: Metcalfe’s Law)
30) Virality = Viral coefficient = average number of invitations sent existing user * conversion rate of invitation
31) NPS (Net Promoter Score) = How likely user is to recommend your product to a friend
32) Platform Risk = Dependence on a specific platform or channel
33) Direct Traffic = Traffic coming directly to your site via a link or entering the URL
34) Organic Traffic = Unpaid traffic from search results
Conclusion
Key performance indicators are the startup metrics that are going to be your best friends. They are how you measure your startup’s growth and everything in between.
It’s easy to get caught up in considering every metric — but don’t, this is counterproductive. Take the time to identify your business model and only measure the key metrics reflect the performance of your startup. What you’re looking for are metrics that are diagnostic in respect of the current state of your startup or predictors of the future.
If you’re new to using analytics and you’re learning about key performance indicators, try to not get overwhelmed and have confidence that you can learn the ins and outs of startup metrics. This is going to be especially important if you’re a first time startup founder because every startup founder needs to be able to understand the data and how it translates into business performance.
Sources:
https://a16z.com/2015/08/21/16-metrics/
https://railsware.com/blog/a-full-guide-on-startup-metrics-for-product-success/
https://fullscale.io/blog/10-business-metrics-founders-must-know/
Do you have any questions? Post them in the comment section below!
If not, what KPIs are the most important to you and why?
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