Must-Track Metrics for Startup Success

So, your company has grown to the point where you really need to start learning from your data. Congrats! I guess? You’re ready to become “data-driven” and take your first baby steps on your data journey, but we know it's easier said than done.

This realization can come from any part of the business - Leadership, Sales, Rev Ops, Growth, and Operations are usually the first to take notice that they need real-time data to track their KPIs. Whether you have a data team in place or not, there are plenty of ways to get started.

Chances are, you’ve already been collecting data, so you’ve already begun walking. The issue is that your data is likely sitting in your disparate tools and systems. HubSpot, Stripe, Aircall, Salesforce, your product - what else did I miss? The painful part is figuring out how to combine the data points from different sources to extract real insights from it.

In our other blog articles, we’ve covered the “how” - how you should set up your data stack and which business intelligence tools can help you model data from different sources and visualize it.

In this article, we’ll be focusing on the “what” - what exactly should you be tracking? What are the important metrics that startups should keep tabs on, to gain insights into business performance and make informed decisions for strategic growth?

Defining the key metrics will allow you to know exactly what to start setting up in your dashboards once you have your BI platform in place. Perhaps you already have some of these sitting in an Excel sheet somewhere. If so, great! It’s time to transfer them over to your BI platform so that your dashboards are updated in real-time, and everyone in your company has visibility.

Here are the metrics that we believe startups should be tracking, split across a few different industries. If this looks overwhelming, don't worry. First, identify your goals and see which metrics make the most sense for you. This is only designed to be a starting point.

SaaS Metrics

• Monthly Recurring Revenue (MRR): This metric measures the amount of recognized revenue that a company is generating in a given month from its recurring revenue streams, such as subscription fees. MRR is calculated by multiplying the number of paying customers by the average revenue per customer (or account) per month. Note that this does not include one-time or non-recurring revenue such as professional services fees.
• Annual Recurring Revenue (ARR): ARR = MRR * 12, to calculate the recurring revenue on a yearly basis.
• Month-over-month MRR Growth Rate: To understand your growth rate on a month over month basis, subtract the net MRR in the current month from net MRR in the previous month, and divide that figure by net MRR in previous month.
• Customer Acquisition Cost (CAC): This metric measures the cost of acquiring a new customer, including all marketing and sales expenses. CAC is calculated by dividing the total sales and marketing spend in a given month, by the total number of customers acquired via paid channels (including sales) in a given month
• Churn Rate: This metric measures the rate at which customers are canceling their subscriptions or ending their relationship with the company.
  - Logo Churn: This describes the amount of logos (accounts/customers) that are lost, as entities. It’s calculated by taking the number of logos lost in a given month, and dividing it by the number of logos at the beginning of the month.
  - Gross MRR Churn (Revenue): MRR lost from existing customers in a given month, divided by the MRR at the beginning of the month.
• Average Contract Value (ACV): This metric helps you track whether your deal sizes or growing. ACV = (Total Contract Value - one-time fees) / total years in contract.
• Customer Usage: This will depend on what type of cloud software you are offering, and what “usage” looks like to you. Once you’ve defined it, it’s a good idea to track the usage to understand customer stickiness and reliance on your product.
• Lifetime Value (LTV): This is a metric that startups use to determine the value of a customer. The goal is to maximize LTV while acquiring customers at a low cost. There are a few ways to calculate LTV, but the most common is to take the average revenue per customer * (1/churn rate)
• Expansion Revenue: This is additional revenue that comes from the customer or account, in the form of cross-sells and upsells after their initial purchase. This is calculated by adding the MRR or ARR from cross-sells with the MRR or ARR from upsells.

Subscription-based companies can also consider the metrics above, however, churn may also be calculated based on users. Gross user churn is the total lost customers (those who canceled their subscriptions) in a given month divided by the total customers acquired via paid channels that month. For subscription-based companies, the MRR Compound Monthly Growth Rate (CMGR) is also interesting if you're trying to figure out the growth rate between two disparate months. Take the [(latest month MRR / the first MRR) ^ (1 / # of months) - 1].

E-commerce Metrics

• Monthly Revenue: Total revenue in a given month
• Revenue CMGR: Take the [(latest month revenue / the first month revenue) ^ (1 / # of months) - 1].
• Gross Margin: Gross margin refers to the difference between revenue and cost of goods sold, divided by revenue. So, it would be calculated as gross profit in a given month / total revenue in the same month
• Gross Merchandise Value (GMV): This metric measures the total value of all merchandise sold through the company's platform. GMV is calculated by multiplying the number of items sold by their retail price.
• Sales Conversion Rate (CVR): This metric measures the number of people who made a purchase out of the total number of people who accessed your website. This is calculated by dividing the number of purchases by the number of website sessions. (# of Purchases / # of Sessions) x 100
• Average Order Value (AOV): This metric tells you the average amount customers are spending at one time on your online store. This is a good metric to track because it can help you better understand incoming revenue and make realistic goals. Divide total revenue by total number of orders.
• Customer Acquisition Cost (CAC): CAC is calculated by dividing the total sales and marketing spend in a given month, by the total number of customers acquired via paid channels in a given month
• Customer Retention Rate: This metric measures the rate at which customers are returning to make repeat purchases. Customer retention rate is calculated by dividing the number of repeat customers by the total number of customers.
• Top Products by Units Sold: Track the top products sold to know what’s popular and in demand, to inform product releases in the future
• Net Promoter Score (NPS): This can and should apply to SaaS and other business as well. This will give you a good pulse on customer loyalty and satisfaction. NPS is calculated by subtracting the % of detractors by the % of promoters.

Marketplace Metrics

• Gross Merchandise Value (GMV): Number of items sold multiplied by price, to calculate total sales volume of merchandise that’s been transacted in a given month
• User Retention: How many of your users are coming back? This metric is the percentageof customers who come back to the Marketplace website to make at least one purchase in the second month
• Customer Acquisition Cost (CAC): Divide the total sales and marketing spend in a given month, by the total number of customers acquired via paid channels in a given month
• Net Revenue: The percentage of the GMV that the company recognizes as revenue for its own intermediary services

Social Network / Advertising Metrics

• Daily Active Users (DAU): Define what “active” means in your business, first and foremost. Then, the DAU refers to the total number of unique users that are active in a 24-hour day, averaged across a given period of time.
• Monthly Active Users (MAU): This refers to the total number of unique users active at least once in the last 30 days.
• Percent Logged In (over past month): Total MAU with a registered account divided by total unique visitors over a 30-day period. This will show you the propotion that actually has a registered account and are logged in.

We hope this is a helpful guide for startups that are starting out in their data journey and need to start setting up dashboards!

Note that these metrics shouldn’t be viewed in isolation, but rather used in combination with other metrics to gain a more holistic view of business performance. Additionally, these metrics should be benchmarked against industry standards to see where the business is performing well and where improvements could be made.

Do you have a specific industry that’s not listed here? Reach out to anna@whaly.io, I’d be happy to help or add more to this article.

Not sure how to model these metrics in your BI platform? Whaly’s data experts would be happy to help you set up your dashboards to track these metrics. Fill out this form to get in touch!