Startup metrics are difficult to track because you do not have sufficient data for an informed comparison. On the other hand, without measuring your performance, you cannot move forward. Your initial parameters are quite simple and straightforward, but you need them. In his blog article, Bernard Marr shares six startup metrics that new businesses should follow.
Why Startup Metrics Are Necessary
In the beginning, your focus is primarily on the profit numbers. You want to mature from a cost center to a money-making machine and retain your sponsors and clients. Your new business should evolve beyond that. For that to happen, you must broaden the metric scope. Furthermore, metrics and KPIs also help you develop new strategies. Following are the six startup metric types for you to track:
Understand the market well and who can be your prospective customers before investing your time in it. Calculate the total addressable market (TAM) to understand the size of the market available at your disposal. There would be competitors to lure clients away from you.
Revenue is one of the essential startup metrics that convinces stakeholders to stay put. They are monthly recurring revenue (MRR), annual recurring revenue (ARR), annual revenue per customer, and customer lifetime value. The customer concentration risk metric warns you not to rely on a single source of income. Month-over-month growth, break-even, and profits margin are other parameters you can work with.
Customer acquisition cost (CAC), customer growth numbers, conversion rates, and return on advertising spending (ROAS) are reliable startup metrics. Since customers are at the core of every business, you must nurture them from the beginning.
Burn-rates, both fixed and variable, notify if you are running out of funds and need to get more sponsors on board. You can curb your monthly spendings by controlling your operating expenses. Also, you would want to increase sales to make up for the mandatory expenditures like rent and salaries.
You must have customers actively following you online as well as tracking your sales campaigns and press releases. When they engage with your product, you have a higher result for the customer engagement metrics. The numbers then translate into how much revenue you can earn from them.
Have a loyal customer base to keep your sales numbers up. Regularly track startup metrics like customer churn rate, retention by cohorts, and net promoter score (NPS). They tell you if your customers are happy with your products and services.
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