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How to Measure Business Growth
2023-01-02 /

How to Set Startup Metrics

What are the most important startup metrics to track? Which metrics really help gauge the health, value, and trajectory of the business?

In this article, we’ll take a look at a handful of metrics that your startup should be monitoring.

9 Key Startup Metrics

As a startup, it is important to track key metrics in order to measure the health and growth of your business. By monitoring these metrics, you can identify trends, set goals, and make informed decisions about the direction of your company. Additionally, if you’re speaking to investors, they’re likely to ask about these things. Here are some important metrics that startups should consider tracking:

01: Revenue

This is perhaps the most obvious metric to track, as it represents the money coming into your business. You should track both overall revenues as well as revenue from individual products or services.

02: Burn rate

How soon are you going to run out of money? If you’re sitting on $100k and your expenses outpace revenue by $15k/month, you’ve got a $15k/month burn rate and roughly a 6-month runway before you’re broke. Burn rate keeps you focused on the big priorities: either raising more capital or addressing the revenue/expense gap before it’s too late.

03: Customer acquisition cost (CAC)

This is the cost of acquiring a new customer, including marketing and sales expenses. It is important to track CAC in order to understand the cost of acquiring new customers and to determine whether your marketing efforts are paying off. With this information, you can tell investors, “Our CAC is $400 and falling, so with an investment of $4 million into sales and marketing, we should acquire at least 10,000 new customers.”

04: Lifetime value (LTV)

This is the total amount of money a customer is expected to spend on your products or services over the course of their relationship with your business. By understanding LTV, you can determine the value of each customer and make decisions about how much to spend on customer acquisition.

How to Measure Business Growth

05: Gross margin

This is the difference between the cost of goods sold and the selling price of your products or services. It is a good indicator of the profitability of your business and can help you determine the pricing of your products or services.

06: Monthly recurring revenue (MRR)

If your business offers subscription-based products or services, it is important to track MRR. This metric measures the predictable, recurring revenue generated each month from these types of products.

07: Customer retention rate

This is the percentage of customers who continue to use your products or services over time. A high customer retention rate is a good sign that your business is meeting the needs of its customers and providing value.

08: User engagement

This is a measure of how active and engaged your customers are with your products or services. It can be helpful to track metrics such as the number of visits to your website or app, the amount of time spent on your platform, and the number of interactions with your content. Another term for this is “stickiness” – how sticky is your product? 

09: Traffic

If you have a website or app, it is important to track the number of visitors or users you receive. This can help you understand the reach and popularity of your business and identify areas for growth.

By tracking these key metrics, startups can gain a better understanding of the health and growth of their business. By setting goals and regularly reviewing these metrics, you can make informed decisions about the direction of your company and identify areas for improvement.

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