How to measure your startup’s success
Kandu expert Ozoda Muminova demystifies the best metrics to set to measure your startup’s progress
I’ve noticed that most start-up founders on Kandu are asking for help with metrics and KPIs (in return for coffee or lunch). Desire to set and track KPIs is not surprising. It is difficult to make a company successful without measuring progress and focusing on the right areas and customers. In addition, if you are trying to attract investors, clients and partners, KPIs measured correctly, give them a clear analytical snapshot on the state of your start-up.
Of course, what metrics and KPIs a start-up needs to track depends on the sector, products/services offered, size of company, stage of growth, etc. But I’d like to offer some of the most commonly tracked metrics. And if you’d like them customised for your start-up, find me on Kandu, take me out for lunch and we can talk!
For start-ups that have apps, web sites or online games, it is important to monitor digital traffic, engagement and conversion metrics:
- MAU — monthly active users is an important KPI. MAU is the number of unique users who visit the site or app in a month.
- DAU — average daily active users, which is even better than MAU, as it reflects both, traffic and engagement (frequency of visitations).
- DAU/MAU ratio — how engaged are your visitors? The higher the ratio the higher the engagement.
- Frequency of visits or visits per monthly visitor — another engagement metric, showing whether your visitors are compelled to use your digital product often enough.
- Activation rate — a conversion metric (that’s what really matters in the end), showing what percentage of your users or prospects move to becoming active users or customers. A low activation rate usually means that your product or proposal isn’t interesting enough or your users/prospects found it difficult to get their heads around it.
- Share rate — number of social shares per user or customer. Are your users or customers happy to spread the word?
Your finance director or a finance director in you will not be happy without tracking cost and profitability metrics:
- ARPU — average revenue per user or customer, it is a useful pulse-check of whether you are attracting the right users/customers and your pricing strategy. Beyond the average, you need to get more granular and look at which products/services and which customers generate the highest revenue, so that you could focus and prioritise.
- CAC — customer acquisition cost is the amount of money you need to spend on sales, marketing, proposals, on average, to acquire a new customer.
- CRC — customer retention cost goes hand in hand with CAC and shows how much you spend on retaining customers. It is important because it is better for a start-up’s survival to drop customers with high retention costs.
- Payback time — how soon do you re-coup the costs through revenue generated.
- Customer retention rate — % of customers who have purchased your product, signed up to a service or downloaded your app that come back within a specified period of time. This period of time could be a week for an app or a year for a client purchasing consultancy services.
- Profit margin — shows how much your product or service sells for above the actual cost and is expressed as a % of revenue minus cost divided by revenue. It is a very important KPI, as it shows whether your pricing strategy is right and reveals a combination of your ability to sell and your customers’ desire for the product.
- Burn Rate — shows how quickly the start-up is spending money and is expressed in £/month. This key metric is essential for determining how much cash your start-up needs to keep operating and growing.
Trends and Benchmarks
Metrics have more meaning if you benchmark them against competition or sector averages, or your targets and trend them over time.
Wishing you high retention and low burn in 2018!
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