Targeting metrics relevant to startups’ goals of growth and scaling success is essential, but with so many metrics out there it can be daunting trying to identify and prioritize those most pertinent to your business’s objectives.
Monitoring startup metrics is vital to identifying areas for improvement, crafting actionable plans and making data-driven decisions to drive growth. Let’s examine eleven essential startup metrics every founder must keep an eye on for growth.
1. Customer Acquisition Cost
Customer Acquisition Cost (CAC) metrics provide a key measure of your startup’s progress. They reflect all marketing and sales expenses associated with each new customer acquisition incurred, such as wages for sales staff or advertising costs incurred for each sale made by your business.
Tracking CAC accurately is crucial, so be sure to include all relevant costs such as taxes, payroll, swag, travel, SEO services and paid ads when setting out your CAC strategy. In an ideal world, customer lifetime value (LTV) should surpass customer acquisition costs (CAC).
Startups should keep in mind that their CAC will increase as they experiment with new strategies, markets and products. While this step is essential for building a successful company, monitoring progress so adjustments can be made as necessary is also key – data will allow your startup to grow faster while attracing investors, as well as helping make smart decisions and stay on course.
2. Customer Lifetime Value
Customer lifetime value (CLV) is the total monetary amount a business expects to make from each customer over their entire relationship with them. Utilizing this metric can help determine how much to spend acquiring new customers, while making sure marketing and sales efforts produce profitable growth over time.
One method to determine customer lifetime value (CLV) is to take an average revenue per customer in retail settings where products are bought regularly by each customer. Another approach would be tracking historical CLV by keeping track of how often someone frequents coffee shops each week or how long they have been using skincare products.
Metrics and data-driven action are the best way to ensure that your business is on a sustainable growth trajectory. To gain more insights into how using KPIs to expand startup growth can benefit you, reach out to an expert from ActionIQ today.
3. Customer Churn Rate
Customer churn rate, commonly referred to as attrition or turnover rate, measures the percentage of customers that leave your business during a specified timeframe. It can be measured on a monthly, quarterly or annual basis by dividing lost customers by initial customer count at start of period.
As a startup, it is critical that you gain a clear understanding of the effect churn has on your revenue. Replacing paying customers typically costs significantly more than acquiring new ones.
Customer churn rates can vary depending on various factors such as seasonality and market trends; but, at its core, an elevated customer churn rate indicates customer dissatisfaction with your product or service. Conducting a comprehensive omnichannel survey around experiences which contribute to customer churn can help identify root causes and take necessary action; additionally it will allow your company to prioritize existing customer needs while closing any gaps between expectations and reality of experience provided by brand.
4. Gross Profit Per Customer
Gross profit per customer (GPPC) is a key metric that businesses can use to formulate effective growth strategies. This metric indicates whether there is enough cash on hand for investments such as opening new stores or entering new markets; additionally, it shows whether additional debt can be taken on by an organization, according to Khan.
Gross profit margins that are high allow businesses to expand without increasing prices, while still meeting customer demands through efficient production practices such as increasing goods shipped per order or upselling and cross-selling strategies.
Gross profit calculations require companies to subtract all sales revenue earned over a given time period from product costs sold during that same period, without factoring in operating expenses such as credit card fees, insurance or office supplies. Tracking gross and net profits helps track relative performance between industries or companies.