As a startup, tracking key performance indicators (KPIs) is critical to measure your progress, identify areas for improvement, and make informed decisions about the future of your business. In this article, we’ll discuss the top 5 KPIs that startups should track to measure their growth and success.
- Customer Acquisition Cost (CAC):
The CAC measures the cost of acquiring a new customer. This metric is important because it helps startups understand how much money they are spending to acquire each new customer. Startups should aim to keep their CAC as low as possible to maximize profits. To calculate CAC, divide the total cost of sales and marketing by the number of new customers acquired during a specific period.
- Monthly Recurring Revenue (MRR):
MRR measures the predictable monthly revenue generated by a business. This metric is particularly relevant for startups with a subscription-based business model. MRR is a valuable KPI because it provides a clear picture of a startup’s revenue growth over time. Startups can track MRR by adding up the monthly revenue generated by all of their subscribers.
- Customer Lifetime Value (CLV):
CLV is the amount of money a customer is expected to spend on a company’s products or services over their lifetime. CLV is an important KPI because it helps startups understand the long-term value of each customer. Startups can use CLV to make informed decisions about how much they can spend on customer acquisition and retention. To calculate CLV, multiply the average revenue per customer by the average customer lifespan.
- Monthly Active Users (MAUs):
MAUs measures the number of unique users who engage with a company’s products or services during a specific month. This KPI is particularly relevant for startups in the tech industry. By tracking MAUs, startups can understand how many people are using their product and how engaged they are. To calculate MAUs, count the number of unique users who access a product or service during a specific month.
- Net Promoter Score (NPS):
NPS measures how likely a customer is to recommend a company’s product or service to others. This KPI is important because it provides insight into customer satisfaction and loyalty. Startups should aim to keep their NPS as high as possible to increase customer retention and referrals. To calculate NPS, ask customers to rate how likely they are to recommend a product or service on a scale from 0 to 10. Subtract the percentage of detractors (those who gave a rating of 0 to 6) from the percentage of promoters (those who gave a rating of 9 to 10) to calculate the NPS.
In conclusion, tracking these KPIs is essential for startups to measure their growth and success. By regularly monitoring these metrics, startups can identify areas for improvement, make data-driven decisions, and maximize profitability.