Key metrics for quantifying business growth
The results of a startup’s financial model generally also include some key performance indicators (KPIs) specific to the company and/or industry. As the name suggests, KPIs are crucial metrics for measuring a business.
KPIs are important not only for investors, but also for founders to measure their operational and financial performance in real time. Metrics can inform decisions about different acquisition channels, business models, and cost structures, for example.
In addition, each business model has KPIs that generally apply to it. The following table provides some examples.
Commercial KPIs
Depending on the stage of the sales funnel your prospective customers are in, you can measure different metrics. The stages, along with the metrics that apply to each, are:
Acquisition
- CAC (Customer Acquisition Cost): identify which channel generates the most valuable traffic and the cost of conversion.
- Conversion Rate: % of users who became customers.
- CAC Payback: # of months it takes to recover the money invested in a customer.
Activation
B2C Model:
- MAU: Monthly Active Users
- DAU: Daily Active Users
- WAU: Weekly Active Users
- # Transactions: How many times the user transacts on average
B2B Model:
- Onboarding
- Process
- # Active Clients
Retention
- Churn rate: Indicates how quickly we lose customers.
- LTV (Lifetime Value): indicates how much value a user brings us over their lifetime.
- LTV:CAC is a key metric because it tells us whether a startup earns more from a customer than it costs to acquire them. It indicates the long-term viability of the business model and strategy.
Revenue
- Monthly Recurring Revenue (MRR): Revenue from monthly sales. MRR is generally used to measure recurring revenue for subscription and SaaS startups.
- Annual Recurring Revenue (ARR): Annual recurring revenue. The total amount of predictable, recurring revenue a startup generates from its customers each year.
Financial KPIs
Finally, in addition to these commercial KPIs, there are 2 other essential indicators that apply to all startups. These are:
- Burn Rate: A measure of a company’s negative cash flow—that is, how much cash it loses or “burns” each month.
- Runway: The amount of time a company has before it runs out of cash, measured in months.