Starting your own startup is super exciting, but it’s not always easy. It’s crucial to keep tabs on your performance. By keeping an eye on some key metrics, you can make intelligent decisions and steer your startup toward your desired destination.
In this post, we’ll explore 7 key startup metrics that every entrepreneur should track to measure their growth and success.
What are startup metrics?
Startup metrics are like a report card for your business They can show you things like,
- How many customers or users you have
- How much money you’re making or losing
- How well your advertising or marketing campaigns are working
By tracking these metrics over time, you can see what’s going well for your business and what needs some work. The metrics help you understand:
- Which products or features your customers like the most
- Where you’re spending too much money
- Which marketing tactics are actually driving sales
So in short, startup metrics are a necessity. By keeping an eye on these numbers, you can see what’s going well and what needs some work.
Why are startup metrics important?
If your data reveals that acquiring new customers has become too expensive, you’ll understand the need to change your marketing strategy to attract customers in a more cost-effective way that yields higher results.
Second, tracking metrics reveals trends that can help you improve. For instance, if your customer retention rate starts dropping, you’ll spot it and take action before it becomes a big problem.
Third, metrics provide proof of success to investors. Showing solid metrics like revenue growth, profit margin, and customer lifetime value demonstrates that your startup is performing well and headed in the right direction. In short, the right startup metrics give you visibility into what’s working and what needs work, and provide objective data to justify decisions and attract funding.
How to track startup metrics
Tracking your startup’s key metrics is crucial for success. Here are some of your options:
The 7 Key Startup Metrics
Here are the 7 key startup metrics you need to track:
- Customer Acquisition Cost (CAC): It shows how much money for marketing and sales you use to catch each new customer. You count up all the money you spend on ads, promotions, commissions, and other customer-getting efforts. It’s calculated by dividing the total marketing and sales costs by the number of new customers gained.
- Customer Retention Rate (CRR): It’s shown as a percentage of the customers that stick around. To figure out your customer retention rate, you can use this formula: [(E-N)/S] x 100 = CRR. E is the number of customers you have at the end of the time period you’re looking at, N is the number of new customers you got during that time, and S is the number of customers you had at the start.
- Customer Lifetime Value (CLTV): Customer Lifetime Value expresses how much money a customer generates over time for the business over time. You figure it by multiplying the average customer purchase by the retention rate.
- Churn Rate: The Churn Rate reveals what percentage of customers stop buying within a set time. You calculate it by dividing lost customers by all active customers from the last period.
- Net Promoter Score (NPS): The Net Promoter Score indicates how willing your customers are to recommend your company to family and friends. For this, You could ask your customer to give your product or service a score between 0 and 10. Additionally, including feedback about your product can help you understand how to improve it and increase customer satisfaction.
- Average Revenue Per User (ARPU): Average Revenue Per User or ARPU refers to how much each customer spends on average. You calculate it by dividing a company’s total revenue by the number of customers they have.
- Monthly Recurring Revenue (MRR): Monthly Recurring Revenue represents the total income from repeating payments or subscriptions. It’s a good metric for subscription or recurring revenue businesses. You track it monthly.
Resources for tracking startup metrics
You have several options to measure the progress of your startup. Here are a few popular tools:
- HubSpot Customer Relationship Management (CRM): HubSpot CRM can track important metrics like the cost of acquiring new customers, how well you retain existing customers, and more. It gives you visibility into the health of your startup.
- Amplitude: This “growth hacking” software analyzes how your customers actually use your products and services. It also shows how people interact with your marketing campaigns. The insights can help you improve customer experience and grow your startup.
- Mixpanel: Similar to Amplitude, Mixpanel helps you understand customer behavior by revealing trends, common patterns, and pain points. The analytics make it easier to find opportunities to improve user engagement and conversion.
- Google Analytics: It is a free and powerful tool that any startup can use to track key metrics and optimize their business. Once you install the Google Analytics tracking code on your website and apps, it will begin tracking metrics like the number of users and sessions, traffic sources and acquisition channels, engagement through metrics like pageviews and bounce rate, and conversions through goals and e-commerce tracking (if applicable). Google Analytics provides robust yet easy-to-use reports and dashboards to help any founder quickly understand the vital signs of their startup’s growth and performance.
In short, tracking key startup stats is critical for any entrepreneur wanting to grow their startup and succeed. By paying attention to indicators like the cost to get a customer, how many customers stick around, and each customer’s total value, entrepreneurs can make smarter choices, see patterns, and get funding. These KPIs are one of the important factors for any investor before investing in the business.
By consistently measuring these numbers, entrepreneurs can steer their startups in the right direction and hit their targets. Regularly reviewing metrics shows investors and employees that you’ve got your eye on what matters most.
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