When you're running a startup, there's a seemingly-endless list of things you've got to keep track of. But while metrics are important to all founders, the challenge becomes separating out the numbers that are truly important from the other 100 things you could track.
Here are seven metrics that truly matter:
The amount of money you have is your lifeblood, and you need to be sure you're using it at an appropriate rate. You don't want to run out before you're able to bring in significant income, just as you don't want to hold money back when freer spending would improve your growth. If your burn rate is too high or low compared to your growth, adjust your expenses accordingly.
Monthly Recurring Revenue
Your monthly recurring revenue, or MRR, is the amount of recurring revenue your business generates month over month. If your business runs on a monthly subscription model, this metric will help make sure that your growth and spending are sustainable. MRR is a particularly useful metric to pay attention to, as it encompasses new business, churn, upgrades and downgrades.
Retention and renewal rates help you understand if you're getting repeat customers or if you're only getting sales from new buyers. If you aren't getting repeat business, you need to examine why--new customers cost a lot more to acquire, so a business that has to constantly gain new buyers isn't generally sustainable over time. A good product, backed by good service, should retain customers and lead to plenty of repeat business.
Lifetime Customer Value
The lifetime customer value is a measure of the net profit a single customer can be expected to contribute to the company through his/her lifetime of interactions with the business. This metric subtracts the customer acquisition cost (CAC), and thus is a good measure of how efficient you are at bringing in high-value customers.
Profit over Revenue
Many startups focus on revenue as a key performance metric, but even more important than revenue alone is knowing how much profit you generate overall. Having extremely high revenue each year, but ending the year in the red isn't a sustainable business structure--eventually, there has to be profit. Honing in on this metric is where many founders discover that cost-cutting is an integral part of growing a successful company.
Quantitative and Qualitative Customer Feedback
Where are you without customers? Out of business! That's why customer feedback should be a key part of your performance tracking. Some customer feedback is quantitative, such as online ratings of an app. Other feedback is qualitative, as in the case of written feedback or reviews. Both types are important to every startup. Since your goal is to keep customers and not have to acquire new ones each quarter, measuring your feedback will help you to improve your product or service and increase repeat business.
Besides your customers, your staff is your most important asset. A company can have a great product and all the right funding, marketing, and sales, but a disengaged staff will still sink the ship. Working for a startup puts a lot of pressure on employees, and knowing about issues that are hurting morale can help you avert significant problems before they threaten you with unnecessary turnover. A quick monthly survey can be all it takes to head off unexpected challenges.
Certainly, there are a lot of different metrics you could be tracking at your startup--but if you track too many, none of them get the attention they deserve. And if you track too few measures of success, important issues will be missed. Starting with these seven critical metrics will give you a pulse on the important issues facing your business, without leaving you distracted by needless reports.
What key metrics does your business track? Will you add any of these seven to the mix? Share your thoughts in the comments!