You can’t run a successful startup on gut instinct alone.
Think about it. Startups grow. With more people and more complexity, there are far more chances for something to go wrong that you won’t see right away. That’s why it’s so important to keep track of your startup metrics.
Why you should track your startup metrics
You wouldn’t drive blindfolded, would you? Even if you made it for a little while, you’d eventually crash. That’s what it’s like to run a business without knowing your numbers.
The risks of not tracking your numbers
Just like keeping your eyes on the road, your metrics tell you when your business is on the right path and when it’s headed for the ditch. Some of the dangers aren’t as obvious as you’d expect.
Imagine your startup sells natural beauty products. You want to create a stable monthly revenue stream, so you decide to offer a monthly subscription box. Your subscription service is a huge hit! Soon, you have so many monthly customers that you need to hire more people to pack and ship orders. Your other sales have increased a little, too.
It looks like a major success. But after eight months, your business is struggling to find enough cash to make payroll and purchase inventory.
When you investigate the problem, you find that your costs are a lot higher than expected. The biggest drain is labor costs. Packing and shipping is more labor intensive than your normal shipping process. On top of that, support has been flooded with complaints and returns as subscription customers want different items in their boxes.
Worse, you can’t just cancel the program or increase the price to make up for it because 30% of your customers paid for a year in advance. You’re obligated to send them all the product they paid for. These losses have put your startup at risk. Even if you downsize, you might not be able to recover and survive.
If you were on top of your metrics, you would have discovered this problem long before it drained your bank account.
Businesses that don’t track their metrics can face any or all of these problems:
- You sell lots of products, but still lose money
- Productivity leaks stop your business from growing
- You miss good opportunities because you don’t have enough visibility
- When problems arise, you discover them too late to prevent serious damage to your business
Fortunately, the reverse is also true. When you keep track of your metrics, you have a distinct advantage.
Gain valuable insights
Your startup metrics are like the dashboard in your car. They tell you how the engine is running. If there’s a problem, your numbers warn you well before the problem is beyond fixing. When things are going well, they help you steer in the right direction.
Let’s go back to the earlier example. Your natural beauty startup wants to make more recurring revenue. To figure out your strategy, you start by looking at your metrics.
Marketing data tells you that social media ads and influencer marketing are your most profitable channels. You also find that ads for your premium skincare line produce the highest revenue.
Since you want to generate repeat business, you analyze your repeat customers. Data shows that most repeat customers are skincare buyers. This finding matches your original market research: skincare customers are more loyal than people who buy makeup.
Based on these findings, you think the best strategy to increase recurring revenue is to attract more skincare customers. You decide to test two approaches.
To reach new customers, you launch an influencer marketing campaign that promotes your speciality skincare. To convert your existing customers, you include a free skincare sample and a discount code in each makeup order.
As these initiatives run, you keep track of the metrics. It’s soon obvious that the skincare samples aren’t attracting new customers, but the influencer campaign is doing well.
You cancel the samples and continue working with influencers. This result helps you create new strategies, too. Now you know that it’s more practical to market to new skincare customers instead of trying to change your makeup audience’s buying habits.
Metrics give you visibility and insights. They can tell you about your core strengths, your most profitable strategies, and the best ways to use your time.
When you know what works – and what doesn’t – you do more and waste less. That can be the difference between a successful, growing company or a startup that never gets off the ground.
Like most things in business, just because this is simple doesn’t mean it’s effortless. Here’s how to get started.
How to track your startup metrics
As a startup, you and your team don’t have a lot of extra time to do deep data analysis. Neither do you have the extra money to buy a suite of specialized tools to do the work for you. This is especially true if you’re bootstrapping – every dollar and every minute matters.
So how do you track your startup metrics? Let’s get into the specifics.
Focus on the data you need
Numbers fall into three categories:
- Things you need to know
- Data that’s useful, but not strictly necessary
- Stuff that doesn’t matter
- You need to know how much you spend on a particular ad campaign and how much revenue it generates.
- It’s useful to know how many times a customer saw your ad before they engaged, but you don’t need this information to make informed decisions.
- You don’t need to know what kind of content those customers usually share on social media. This information just distracts you from data that actually matters.
Keep in mind that a number by itself isn’t much good. You need context. A 3% conversion rate is great if all your other sales pages convert at 1%. But it’s not good if that same page used to convert at 8% last quarter.
Don’t get hung up on a single data point. Numbers aren’t important by themselves. They only matter when they give you insights and help you identify trends.
Too often, startup leaders fixate on a particular metric and forget to look at the big picture. Go ahead and aim for a lower customer acquisition cost, but don’t forget to consider how much those customers are worth over their lifetime.
Later in this article, you’ll learn a lot more about the metrics you should track. First, here’s what you need to know about tools.
When you’re ready, choose tools wisely
For the most part, it’s easy to find the raw data you need. You can easily look up how much you spent on ad campaigns and how many sales you made last month, right? Finding information is the easy part.
The reason you need tools is because that information is useless until you collect it all in one place and analyze it for useful insights.
If you’re good with spreadsheets, that’s a good, inexpensive starting point. Invest the time and effort to build templates that calculate your key metrics from raw inputs. This takes a little bit of skill, but you can easily learn how to do it with online tutorials.
You shouldn’t rely on spreadsheets forever. This strategy is time and labor intensive. As your business grows, it becomes increasingly impractical to expect your team to collect and analyze data this way.
That’s where tools come in. A tool is worth the expense if it enables your team to do better work and make more money.
Most analytics tools accomplish this by saving your team’s time and giving you better insights to inform your decisions. In other words, they make it possible for your team to work better and faster so that you make more money.
How much is a good tool worth? That depends.
If you’re bootstrapped, you don’t need an end-to-end analytics platform that costs $1299 per month. There’s no practical way that you’re going to get an extra $1299 of value from the time you save.
A tool that charges $100 per month might also feel expensive, but consider whether you’re likely to recover that cost. If it saves 10 or 20 hours per month (considering your time and your team’s time) then it might be worth the money.
Complexity is another concern. If a tool is clunky and inconvenient, you won’t use it. That’s a waste of money.
A good tool shows you what your numbers look like now and makes it easy to see how those metrics trend over time. Remember: numbers aren’t important on their own. It’s all about the context and analysis.
With that in mind, here are the metrics you should track for your startup.
10 startup metrics to track
In this section, you’ll look at some of the most important metrics a startup should track. That doesn’t mean that these are the only metrics you should track.
Your metrics are the lights on the dashboard that tell you how things are running. An airplane has a different dashboard than a sports car because you need to know different things when you’re driving a different vehicle. Your business is the same.
Depending on your industry, you probably need to track some key performance indicators (KPIs) that tell you things you need to know. For example, companies that make mobile games need to know a lot about the ways their players engage with games.
At the end of this list, you’ll find more information about how to identify those personalized metrics for your startup.
1. Customer acquisition cost (CAC)
Customer acquisition cost is the amount of money you need to spend to earn a new customer.
This metric is important because it tells you if you’re really making a profit when you make a sale. It also tells you how much you can realistically spend on marketing, and it’s a good metric to track when you’re comparing the effectiveness of different ads or campaigns.
Even if you don’t spend money on advertising, you do spend money on the time and effort you invest to get your products in front of people. Make sure you consider those costs.
How to calculate your customer acquisition cost:
First, find the total amount of money you spend on marketing in a month. Include paid ads, printing costs for flyers, the cost of free samples, money budgeted for live events, and anything else you spend to acquire a new customer.
Now, divide that by the total amount of new customers you gained that month. That’s your customer acquisition cost. You spend that much money to get a new customer. Here’s an example.
Last month, you spent:
- $600 on Facebook and Instagram ads
- $150 to place an ad in a local newspaper
- $50 to sponsor a podcast
- $75 in free sample products that you gave out at a chamber of commerce event
- $125 of donated products as a prize for a fundraiser raffle
That means you have $1,000 in acquisition costs.
You gained 60 new customers last month, so your customer acquisition cost is about $16.67 ($1000/60).
Is that good?
The number itself isn’t good or bad. It is what it is. To figure out if your customer acquisition cost is a good sign or a danger warning, you need more context. The other metrics in this list will help with that.
If non-purchasing users are a major part of your business strategy, you should also track how much it costs to acquire a new user. That might mean that you track the cost of new accounts, newsletter subscriptions, or app downloads.
This is especially important because you invest time and money to attract these users. If you’re not careful, you can devote too many resources to acquiring new users at the cost of your profit potential. This next metric helps give you the context you need to determine that.
2. Average revenue per user (APRU)
Average revenue per user tells you the average amount of revenue you make for each customer or user. Average revenue per user tells you a lot about the health of your business by showing you how much your customers spend.
It’s a great tool to see if your marketing efforts are reaching the right people. For example, if customers who find you through Facebook ads spend significantly less than your other users, you’re probably targeting the wrong audience.
Calculate the average revenue per user by tracking the amount of revenue you generate in a month, then dividing that by your total number of active users.
Let’s say you made a total $8,000 last month. Including both your new customers and your existing users, you had 350 active users. That means that your average revenue per user is about $22.86 ($8000/350). The tricky thing about this metric is defining what an “active user” is for your business. Let’s talk about that.
Defining active users
The way you define your active users depends on your industry and business model. Here’s an example:
If a person made a purchase two months ago, are they an active user? If most people buy a three month supply of a consumable product, then yes, they should be considered active. But if most of your customers are one-time purchasers, then they probably shouldn’t be counted as an active user after 60 days.
An active user might be someone who has logged in at least once in the last 30 days, even if they don’t make a purchase. It could be anyone who has read a blog post, added an item to their cart, or opened an email.
That’s your decision to make.
Choose something that makes sense for your business model. Think about what keeps people coming back and makes it more likely that you’ll generate revenue from that user again.
If you offer a freemium product, you can expect most of your active users to be non-purchasers. That’s okay. You should still include them in your average revenue per user calculation.
Once you decide the criteria for an “active user” at your company, stick with it. Changing the rules after you’ve already started collecting data can cause lots of complicated problems.
Average revenue per user is a good metric to tell you whether or not customers spend money at your business. It’s not a great metric to tell you how valuable those customers are. That’s where this next number comes in.
3. Customer lifetime value (CLTV)
Customer lifetime value tells you how much an average customer is worth to your business from the first day they shop with you until they make their very last purchase and move on. You might see customer lifetime value abbreviated as CLV, CLTV, or LTV.
As a startup, this metric is more of an educated estimate than a concrete number. You need years of historical data to see any actual customer lifetime value numbers. That means that the longer you track your startup metrics, the more accurate this estimate becomes.
When you have a good idea of your average customer lifetime value, you know how much you can spend on marketing and re-engagement campaigns while still expecting to generate a return on that investment.
In order to calculate lifetime value, you need to understand how people are likely to engage with your business.
- How long is a customer’s lifetime?
- How often do customers purchase?
- How much are those purchases?
- What’s your net margin on customer purchases?
Once you have those numbers, calculate lifetime value by figuring out how much you’ll make per purchase and how many purchases a customer is likely to make over their lifetime. This can get tricky. Let’s break it down.
What is a customer’s lifetime?
If you have historical data, that’s the most accurate way to estimate how long your current customers are likely to stick around.
For this calculation, you need to compare your customers’ first purchase date and last purchase date. Exclude any customers who are still active and only look at people who are unlikely to place another order.
Don’t do this manually. It’s way too much work. If you’re using a spreadsheet, export that data to the sheet and run a script to give you the number of days between the first purchase and last purchase.
Calculate the average number of days between first and last purchases. That’s your average customer lifetime. Determining if a customer has reached their “last” purchase might be tricky if most people order inconsistently.
Use your best judgement. If someone hasn’t ordered anything in nine months, that’s probably an inactive customer – unless you specialize in seasonal products like holiday decorations.
If you don’t have the data to analyze, that’s okay. For now, you can create a medium-confidence estimate using industry averages. Look up the average customer lifetime for businesses like yours and compare it to your customer behavior to see if it makes sense.
How often do customers purchase?
Some businesses rely heavily on one-time orders. Others operate on a monthly subscription model. Lots of companies are somewhere in the middle and want customers to be repeat buyers, but don’t expect them to commit to monthly payments.
How often do your customers come back? Figure this out by calculating the average number of purchases per year.
For very short customer lifetimes (six months or less) it may be a good idea to calculate average purchases per month. That will give you more insight into how this cycle works for you.
If your customer lifetime is more than one year, calculate the average number of purchases the first year, then the average number of purchases the second year, and so on. It’s likely to be different over time.
But what if your business is heavily seasonal? What if people tend to purchase frequently when they first discover you, then taper off over time?
The average number of purchases per year is still the same whether those orders happen within the space of three months or 12. Don’t overcomplicate things. Sure, it’s nice to have a chart that shows how customers engage with your business. That’s just one of those metrics that’s nice-to-know, but not need-to-know.
What’s the average order size?
This is a metric you should keep handy. Watch this number to tell you if your marketing efforts are working, if your website is compelling, and if your upsells are effective.
In the context of your customer lifetime value, average order size tells you how much revenue you’re likely to generate from each new customer.
Calculating this figure is straightforward. Just look at the average order amount for all the orders placed in a year. Some back office software will give you this figure automatically.
Average order value tells you about revenue. If you want to know about customer value, you need one more thing: net margin.
What’s your net margin?
This is something you probably know already. It’s the difference between your product costs (also called cost of goods sold) and the revenue you generate from those purchases.
If you have many products with widely different margins, you should look at your sales data to determine the average margin for your business as a whole.
For companies that sell services or information products, there’s still a cost of goods sold. Margins might be high, but they’re rarely 100%. For example, businesses who sell SaaS products need to factor the labor involved in onboarding and supporting a new customer.
For now, you don’t need to consider other expenses like overhead and fixed costs. That means that software as a service companies don’t need to factor in development expenses and you don’t have to consider how much you spend on marketing.
Those are all important numbers. You should know those figures. But they’re not part of your customer lifetime value calculation.
Calculating customer lifetime value
You’re finally ready to take all of those numbers and use them to calculate this metric.
Start by calculating how many purchases a customer will make during their lifetime. You already did most of this when you calculated how often people buy from you. If your customer lifetime is long, multiply your average purchases per year by the number of years a customer is likely to continue purchasing from you.
Here’s what that looks like:
Your average customer makes eight purchases per year and they stick around 30 months, which is 2.5 years. That means that the average number of purchases over a customer lifetime is 20 (8 x 2.5).
Next, calculate how much value you generate per purchase. Do this by multiplying your average order size by your margin percentage. For example, if your average order size is $60 and your margin is 40%, then you generate $24 in value per purchase ($60 x .40).
Finally, multiply the number of purchases an average customer will probably make during their lifetime with the average value per purchase.
Since your customer makes 20 purchases over their lifetime and each purchase is worth an average of $24 to you, your customer lifetime value is $480 (20 purchases x $24).
What does that mean? If your total marketing, servicing, and retention costs are under $480 per customer, you’re still likely to make a profit.
This is important to think about. Since a customer’s first order only makes you about $24, you might think that spending $60 in marketing costs is totally impractical. Customer lifetime value helps you understand that you’re going to recover those costs and make a much bigger profit over time, so your investment really does make sense.
Customer lifetime value is important when you need to consider the long-term viability of your business model. So is the next metric on this list.
4. Overhead cost
Overhead costs are all the expenses you have to pay to keep your business running even though they don’t directly contribute to your profits. Think of things like rent, administrative expenses, business licenses, and taxes.
Some of these costs are fixed. No matter what your sales figures look like this quarter, fixed costs are the same. In other words, your rent doesn’t go up because you had a particularly busy month.
Others are variable and change according to how much volume your business does. Taxes are directly related to your revenue, for example.
Business expenses like materials, labor, and production costs aren’t usually considered part of your overhead. These are called direct expenses. For the purposes of your startup metrics, you should know all of these costs, too.
Track your overhead costs by keeping a list of your ongoing expenses. You can probably use your financial management software to do this.
As a startup, your margins are too tight to spend money recklessly. You must be able to see your whole financial picture before you make any spending decisions, and you must have the discipline to monitor and trim overhead to give you room to grow.
5. Monthly active users (MAU)
How many people engage with your business each month? This metric is called monthly active users.
You learned about active users earlier when you calculated average revenue per user. For monthly active users, the criteria is slightly different because you’re only counting people who took some kind of action during a 30-day period.
Some businesses calculate monthly active users on a rolling basis, but for the sake of simplicity, it’s fine to consider calendar months.
Start by defining what an active user means for you. Do they need to make a purchase? What if they log into their account and don’t engage with anything else? If they call customer service, does that count? Use the same criteria that you set for average revenue per user.
Looking at your monthly active users over time can tell you about seasonality, the success of your sales team, the health of your business, and how likely customers are to stick around.
If your business depends heavily on repeat business, monthly active users should trend higher over time. That means that customers are coming back and you’re earning new customers. If that number stays the same, you’re losing customers at the same rate that you’re gaining new ones.
For businesses that focus mostly on one-time purchases, your monthly active users will fluctuate more with seasonality. Look at year-over-year trends to see if you’re meeting your growth goals.
Some startups track daily active users (DAU), too. This is important when your customer lifecycle is short and you need to track engagement closely.
For example, companies that make mobile games often deal with average customer life spans of a few months or weeks. They need to watch engagement on a daily basis, monetize early, and react quickly if daily active users start to drop.
If you track both daily and monthly active users, be aware that you can’t just add up the active users from each day to get a monthly total. Doing that means that a person who engages 12 times during a month will be counted as 12 users in your MAU total. Calculate each figure separately.
5. Activation rate
This metric tells you how many of your new users are activated, which means they’ve taken some kind of desired action. The action they take is usually linked to customer value.
Imagine you offer a freemium software product. It’s free for users to visit your website and use a simple version of the tool. At any time, those users can upgrade to a two-week free trial of the premium version. At the end of the trial, they can either pay to continue using the premium tool or go back to the free version.
The percentage of people who sign up for the free trial is your activation rate. You would find that number by comparing free trial signups to all of the people who used your free product during a given timeframe.
The formula looks like this:
Activation rate = (Activated users / total new users) x 100
Note: You multiply that number by 100 to get a percentage.
Activation rate is usually calculated based on time periods. You want to know how many people activate within two weeks, within a month, and within three months. Comparing figures by time frame gives you insight into your sales funnel and customer behavior.
This metric tells you how successful you are at the beginning of the customer lifecycle. A low activation rate warns you that you’re not meeting expectations or you’re marketing to the wrong people. As important as it is, activation rate isn’t relevant to every business and industry.
Pretend you own a beachside boutique that specializes in sunglasses, beach toys, and other impulse buys that tourists pick up on vacation. You could technically calculate activation rate by comparing the total number of people who come in to browse with the total number of people who actually make a purchase. But that’s not a business critical number and it would be a lot of work to figure out.
Now, imagine you took that business online. To win more customers, you offer a free vacation guide that visitors can download when they subscribe to your email list. It makes sense to track the activation rate to see how many of your website visitors become subscribers.
It’s important to calculate activation rate when there’s a clear step in your sales funnel that tells you a user now has value.
If you offer a free trial, your activation rate might be the percentage of people who go on to become paying customers. For media companies, activation rate might be the number of people who subscribe. You get to decide what this means. If it’s not useful for your business, skip it.
6. Monthly recurring revenue (MRR)
This is any income you make on a regular, predictable basis. This might include rent payments, subscription fees, or membership dues.
If your business does not have any form of recurring revenue like contracts or subscriptions, feel free to skip this section.
It’s important to track your monthly recurring revenue separately from your non-recurring revenue. This is a steadier income stream. Changes to your recurring revenue tell you about bigger changes in your business.
You may also use your monthly recurring revenue figures to help you make long-term financial decisions. Since this time of income is less dependent on seasonality, you can better forecast your annual revenue and make informed choices.
There are two ways to track this metric.
First, you can track your actual monthly recurring revenue by keeping a record of how much of your revenue each month comes from recurring sources. This gives you a history of accurate data.
To forecast monthly recurring revenue, multiply your average recurring order size by the total number of customers you expect to have that month.
You should also consider your annual recurring revenue. This gives you a broader picture of the health of your business.
Ideally, monthly recurring revenue should grow over time. Your annual recurring revenue should increase year over year. If you’re adding new customers and your recurring revenue stays flat, that tells you that you have a retention issue to address. That brings us to the next metric on the list.
7. Customer churn and retention rate
If you’re only looking at money coming in, you’re missing a crucial startup metric.
Churn rate is the percentage of customers who leave your business during a certain time period. Usually, you compare with the new business you earn during that same time.
If your business has high customer churn, that means that you lose existing customers faster than you earn new ones. You have a retention problem. Low churn means that your customer base grows because you add new customers while retaining the ones you have.
Retention rate is closely related and deals with the percentage of customers you’re able to keep compared to the people who stop shopping from you. It’s the opposite of churn.
Calculating churn can get complex. Some businesses calculate it by cohort, try to factor in seasonality, or calculate on a rolling 30-day basis instead of using calendar months.
You don’t need to spend that much time and effort on this. Here’s how to calculate your basic churn rate:
In any given month, find your churn percentage by taking the total number of people who stopped shopping from you that month and dividing it by your total active customers. You can use the same criteria for an active user that you decided in the average revenue per user section.
Retention rate is the other half of this calculation. Take the total number of active users, subtract new customers and churned users, and that gives you the number of people you retained. Retention rate is the number of retained users divided by the total number of users.
Calculating churn can be confusing. Here are some tips.
Start by defining what a churned customer is for you. If they last made a purchase 90 days ago, that might be a churn or you might still consider them active. That depends on your normal buying cycle.
That means that you might identify churn several months after a customer’s last interaction with you, and that’s okay.
Some types of businesses can identify churn right away. A cancelled subscription or deleted account are both types of churn, and you know exactly when they happen.
You might have some customers that buy based on a subscription and others who make purchases on their own schedule. In that case, you can have different churn criteria for each and calculate churn separately or average the rate together. It’s up to you.
Churn and retention tell you if you’re doing a good job serving customers. It helps you identify if you’re fulfilling the promises that marketing and sales teams made.
High churn warns you that it’s time to investigate the quality of your products and your service. There’s a reason customers aren’t sticking around. Changes in retention and churn can happen because of marketing campaigns, seasonality, and external factors. Use these metrics as an indicator that you need to dig deeper.
8. Revenue churn rate
Revenue churn rate is similar to customer churn, but it’s directly related to your monthly recurring revenue. This metric tells you if your recurring revenue is dwindling even though you’re earning new customers.
Knowing your revenue churn rate is an important part of forecasting. If you don’t take churn into account, you might expect your monthly recurring revenue to grow much faster than it actually does.
The calculation is simple.
First, you must find the total amount of monthly recurring revenue you lost this month. You can find that number by looking at cancellations and downgrades.
If you don’t have any easy way to find that, you can also calculate your lost revenue by looking at the monthly recurring revenue for existing customers only at the beginning of the month and the end of the month. Subtract the end of the month MRR from your MRR at the beginning of the month to find your lost revenue.
To find your revenue churn percentage, divide your loss by the recurring revenue at the beginning of the month. Multiply the number by 100 to get a percentage.
Here’s what that formula looks like:
Revenue churn rate = (Lost monthly recurring revenue / Beginning of month MRR) x 100
If your revenue churn is high, that means you’re losing existing revenue faster than you’re generating new revenue.
Runway is the amount of time you have before you run out of money.
Funded startups need to keep track of their runway because they need to know exactly how long they have to reach profitability. Most of the time, bootstrapped startups don’t consider this metric because they have to make money to spend money.
To figure out your runway, you need to know your net burn rate.
Net burn rate is the speed at which you’re losing money. Since you have some income, you have to consider the rate that money comes in compared to the rate that money goes out. A lot of the metrics you already learned about in this article will be important to help you figure that out.
You should be creating profit and loss statements on a monthly basis. The average loss over the last year (or however much data you have if it’s less than a year) is your average burn rate.
Calculating runway is easy. It’s just your current assets divided by your net burn rate. That shows you how many months it will take to run out of money.
For example, if you have $250,000 in funding and you lose an average of $15,000 per month, your runway is 250,000/15,000, which means you have a little over 16 months of runway.
10. Revenue growth rate
Revenue growth rate is just what it sounds like. It’s the metric that tells you how fast your business gains new income.
Keep in mind that revenue growth does not always mean growing profits. You might decide to increase your spending to reach new customers, and if your revenue doesn’t increase as much as your spending, you might see revenue growth along with lost profits.
Track revenue growth over time. Watching trends in your revenue helps you figure out seasonality, see the impact of external events, and judge the success of your strategy.
Revenue growth rate is measured as a percent change. A positive number means that your revenue during this period is higher than it was during the previous period. A negative number means that you lost revenue.
You can measure growth year-over-year, quarter-over-quarter, or month-over-month. It’s okay to track it multiple ways depending on what you want to see.
To calculate revenue growth, the formula is simple. Simply calculate your revenue for the current month (or quarter, or year) and divide it by the revenue from the month before.
It looks like this:
Revenue growth rate = (Revenue this period / revenue last period) x 100
Revenue growth rate for a single month isn’t going to tell you a lot, but if you look at it in the context of your marketing efforts, spending, revenue churn, and historical trends, you can get a clear picture of how well your business is doing.
Other startup metrics you need to track
The metrics in this article are valuable to help you keep your startup running smoothly. They aren’t the only things you need to consider, though.
As a startup founder, you know what you want to see. The hard part is determining which numbers are important enough to track and which ones just muddy the waters and take your focus away from the things that matter.
To determine what else you should monitor, ask yourself these questions:
How does your company make money?
What is the action that a customer takes to generate income for your company? A social media company makes money in a totally different way than a designer shoe store.
You should keep track of any data points that give you insight into your income stream. Daily signups might be important. Ad impressions within your platform or your game could be valuable to monitor.
Also, be mindful of any warning signs that tell you when customers are going to leave. If you make money primarily from showing ads, you might want to keep track of the percentage of ads that get skipped or the number of times people close an app to avoid an ad. Focus on metrics that move the needle. It should be directly related to how you make money.
What insights do you need to make decisions about strategy?
Think about the questions you ask your team over and over. Is your strategy marketing-focused? Keep an eye on the top marketing metrics you use to make decisions.
Are you obsessing about great customer service being your competitive edge? You probably want to keep track of your customer ratings and service metrics. You know the way your mind works. Try to keep clutter to a minimum, but include any data points that you find particularly insightful.
What are your short- and long-term goals?
Just like the data points that are directly tied to profitability and revenue, think about the things you need to know to reach your business goals.
Some of your business goals might be focused on things other than income. Do you want to revitalize the downtown shopping district where your storefront is located? You might want to track foot traffic. Is it important that you support a charitable cause with your sales? Keep track of your quarterly donation figures.
Are you working to create the best possible employee experience? Collect feedback and monitor things like satisfaction scores and employee engagement levels.
For short-term goals, you can track some metrics on a temporary basis. Once you’ve reached your goal and moved on, change your tracking documents or dashboards to focus on the next thing.
What do your stakeholders need to see?
If you’re funded, your stakeholders expect regular updates. Make sure you keep track of the things that are important to them. Most of the information you need for your investors is already included in this article. Think it through and focus on covering any data points that are specific to your business.
Startup metrics tracking template
Many startup founders keep their metrics in a handy dashboard so they can see the most important figures at a glance. You’ll need to decide which numbers are most important to you.
Here’s a handy template to help you get started:
This is a lot of information to track. Is it really necessary?
The short answer is this: yes. Metrics are there to answer questions and warn you about potential problems before they become too expensive to fix.
It might seem tedious to calculate your monthly active users at the beginning of every month. But if that number suddenly takes a sharp drop, you’ll spot a problem in real time rather than waiting until it impacts your income.
These numbers don’t need to live on your desktop all the time, either. Some of them are things you want to check every few days, and others you might calculate once per quarter.
You might not fully understand all the data points you read about in this article, and that’s okay. You’ll learn as you go. In the meantime, bookmark this article to use as a reference.