You’re about to launch your dream startup. You have a product ready, you know your audience, and your plans are set. The money is in place, and you’re ready to hit the market. But here’s the question: how will you know if your Startup’s Growth will work? What metrics will you track!
Why are metrics important?
If you are in the growth stage of your startup, tracking the performance metrics is of utmost value. If the performance measurement is on point, there is every chance that your business will grow.
How will you track if customers like your product? Are they spending time on it? Are they exploring features, reading your content or simply leaving in a few seconds? To figure all this out, you need startup growth metrics.
Startup Growth Metrics are tools that measure how effectively your business is growing! They highlight what’s working well, identify areas that need improvement, and reveal growth opportunities.
Key Metrics
In this blog, we will explore the 5 key metrics that every startup founder must understand, monitor, and track to build a successful company. Here are the top 5 Startup Growth Metrics one should always watch.
Acquisition
1. Customer Acquisition Cost (CAC) – Customer Acquisition Cost is one startup metric companies use to track the amount they spend to acquire a new customer. The cost includes the money spent on marketing and sales, like ads, promotions, or salaries for your sales team.
For example, if you are spending ₹ 10,000 for marketing your product to gain 10 new customers, then your CAC will be ₹ 1,000 INR per customer. So, in simple terms, keeping the CAC low while gaining customers is key to running a successful company. This is one of the most important startup metrics to keep an eye on. Not keeping up with the cost often becomes the biggest mistake committed by the business which leads to the eventual downfall.
Formula to calculate CAC
CAC = Total Sales and Marketing Costs/Number of New Customers Acquired
So, keep the CAC to a small number and pave the way towards building a successful business.
Customer LifeCycle
2. Customer Lifetime Value (CLV) – Customer Lifetime Value is the total revenue a customer will give to your business while he continues to use the product or your offerings. It is one of the vital startup growth metrics that businesses must keep an eye on because it tells you how well the customers are interacting with your business. At the same time, it gives a complete picture to the startups as to whether their plans with respect to marketing and sales are working or not.
Formula to calculate CLV
CLV = Average Purchase Value × Purchase Frequency × Customer Lifespan
By calculating these numbers, startups can plan out strategies to focus on customer retention, target high-CLV customers with lucrative offers, and more.
3. Churn Rate – Gaining customers is vital, but retaining them is the most important goal! Retention is the difference between product market fit and not! To understand how many customers are leaving a startup, tracking the churn rate is crucial. This metric helps startups assess customer retention and make decisions to improve loyalty, making it one of the most important indicators to monitor for long-term success.
Formula to Calculate Churn Rate
Churn Rate= (Number of Customers Lost during a Period/Number of Customers at the Start of the Period)×100
A high churn rate indicates that the current product/service delivery is not effective. It tells the business that significant changes are needed in the service delivery to improve customer retention and overall business performance. Or it could be that the business is acquiring wrong customers!
4. Revenue Growth Rate – To track your business’s growth, it’s essential to monitor key metrics like the Revenue Growth Rate. By keeping an eye on this metric, companies can assess their performance over a specific period and compare it with the results from previous time frames.
The time frame could be year-over-year (YoY), quarter-over-quarter (QoQ), or month-on-month basis.
Formula to Calculate Revenue Growth Rate
Revenue Growth Rate = (Change in Revenue in Current Period vs Previous Period / Revenue in Previous Period)×100
So, a higher Revenue Growth Rate indicates that the business is growing, attracting more customers, and successfully increasing its sales. It shows that the company is moving in the right direction, expanding its market presence, and generating more income compared to previous periods.
Customer Type
5. ACV- ACV or average customer value gives us a sense of size of each contract! This defines what kind of customers you have and if these are growing or is it the numbers of customers that are growing?
Formula to Calculate ACV
ACV = Total Revenue / Total Customers
Keeping an eye on these metrics helps companies identify the adjustments and changes needed in their sales and marketing strategies, ensuring the business remains sustainable and continues to grow over time.
Conclusion
So keeping a detailed track of the above-discussed key metrics is vital for every startup’s success. These metrics not only help businesses measure their current performance but also enable them to make decisions about their strategies and ensure long-term sustainability.
As you move forward with your business plans, keep a close eye on these metrics, change your plans accordingly, and stay focused on building a strong foundation for your startup.
And guess what? We can help you track all these. If you need help understanding these metrics or implementing effective strategies, feel free to reach out to us at admin[at]startupanalytics.in
