50+ Metrics Startup Founders Need to Know

SEO + PPC Cost

Typical investment and expected return in SEP and PPC ads

Things to consider for SEO:

● Avg. Cost per Click

● PPC Budget
● Expected Traffic on the Website
● Conversion Ratio (%)
● No. of Conversions
● Avg value of Product
● Total Sales

Things to consider for PPC:

● No. of Keywords ranking on the first page

● Estimate the average monthly search volume of a keyword
● Total Estimated Traffic
● Conversion Ratio (%)
● No. of Conversions
● Avg value of Product
● Total Sales
SEO + PPC ROI

ROI on SEO and PPC. SEO has some additional benefits in the long run.

The key question would be "How much revenue is generated from

PPC/SEO?"

Growth Cost
MoM / QoQ / YoY

Growth is an important metric to measure the growth and profitability of

your business. Businesses measure growth in multiple ways: monthly,
yearly and quarterly.

ROAS - Return on ad spend

Return on ad spend (ROAS) is a metric used to measure the total revenue

generated per advertising dollar spent. It is calculated by dividing the
campaign revenue by the campaign cost.

CAC - Customer Acquisition Cost

Customer acquisition cost (CAC) enables companies to determine how

much money they spend on attracting new customers, taking into account
marketing, sales and other costs. For SaaS companies, it is important to
make sure that the cost of acquiring customers does not exceed the
amount of money generated by them. The following formula can be used to
calculate exactly how much money a company spends on customer
acquisition:

By measuring the amount of money spent on attracting customers,

companies can then formulate the most cost-effective acquisition strategy.

LTV - Customer Lifetime Value

Lifetime Value (LTV) is the cumulative gross profit contribution, net of CAC,
of the average customer in a cohort.

LTV is determined by taking CAC, Dollar Retention, and Gross Margin into
account to evaluate overall company health. If NRR is greater than 100%,
LTV can increase indefinitely. However, if customers churn, LTV will flatten
out and stop increasing.

Healthy cohorts cross the $0 LTV line before month 12, and LTV grows to at
least 3x the original CAC over time.

Time to pay back CAC

It is the time of how many months it takes for a customer to generate

enough gross profit to pay back their CAC.

Lower-margin products with high CAC do poorly on payback.

CAC : LTV Ratio

The act of comparing your customer acquisition cost and customer lifetime
value as a ratio.

Marketing % of CAC

The Marketing % of Customer Acquisition Cost is the marketing portion of

your total CAC, calculated as a percentage of the overall CAC.

Marketing Originated Customers %

The Marketing Originated Customer % is a ratio that shows what new

business is driven by marketing, by determining which portion of your total
customer acquisitions directly originated from marketing efforts.

Marketing Influenced Customers %

The Marketing Influenced Customer % takes into account all of the new
customers that marketing interacted with while they were leads, anytime
during the sales process.
Email Marketing ROI

Total ROI from the email marketing campaign.

MQLs - Marketing Qualified Leads

Marketing qualified leads or MQLs are leads who have expressed an

interest through marketing channels or campaigns. That could be a
download of an eBook or signup to your newsletter. These are great ways
to track how your marketing efforts are helping to drive leads.

PQLs - Product Qualified Leads

Product-qualified leads (PQLs) are the new MQLs for some SaaS
businesses. Remember when we mentioned signups? PQLs are signups
that can be differentiated like this.

Signup is just signup. A PQL is a signup followed by a series of

engagements from that user. The difference is the intent to continue to use
a product. As such, definitions for PQLs will vary from business to
business.

MRR - Monthly Recurring Revenue

MRR is the widely used metric to understand how much revenue customers
are generating over the course of a month. In the SaaS realm, this amount
of projected new revenue can come from either new sales or existing
business expansions.

ARR - Annual Recurring Revenue

ARR reveals how much revenue a company generates over the course of a
year. Both ARR and MRR offer organizations insight into the financial
well-being of their business and its collective progress.

ARR - Annual Run Rate

Annual run rate (ARR) is your monthly recurring revenue (MRR) annualized.
It’s a prediction of how much revenue your company will generate annually
based on your current MRR. This metric is predominantly used in
companies with MRR and no ARR (Annual Recurring Revenue)

ARR assumes that nothing else will change in your business over the year
(no new customers, no churn, or expansion revenue).

CMRR - Committed MRR

Committed Monthly Recurring Revenue (CMRR) is a prediction metric that

combines recognized monthly recurring revenue (MRR) with new sign-ups,
churn, and downgrades/upgrades.
Contraction MRR

Contraction MRR is MRR lost from existing customers. The lost revenue
could come from customers downgrading their plan, reducing the number
of users on their plan, missing their payment or anything else that
decreases the amount of money an existing customer pays you monthly.

There’s one thing you have to keep in mind though. Contraction MRR does
not include customers who’ve cancelled. It should only include revenue lost
from customers who are still active.

Expansion MRR

Expansion MRR is additional MRR that comes from existing customers. It

could be from users who’ve upgraded their account, purchased an add-on
product, added additional users to their account or anything else that
increases the amount of money they pay you each month.

In some cases, you can build opportunities for the expansion of MRR
directly into your business model. For instance, if you sell a B2B SaaS
product aimed at teams, you can charge per seat. As your customer’s team
grows, they’ll add additional users to their account, which creates
expansion MRR for you.

SaaS Quick Ratio

The Quick Ratio of a SaaS company is the measurement of its growth

efficiency.
ROI - Return on Investment

Return on investment (ROI) is the value you need to understand how your
work impacts your bottom line. For marketing in particular, if you’re not
securing a high return on your investment, then you need to assess your
output.

Net Negative Churn

Simply, net negative churn is when current customers are spending so

much additional money (services, upgrades, and add-ons) that your churn
is offset by it.

Total Cost of Service

Total costs incurred to build and operate your product.

For an average cost of service, sum up these expenses on an annual basis

and divide by customer count to derive ACS.

Customer Concentration

Is your growth being driven by only a few big contracts or many small ones?
In easy terms is it just concentrated from one source?
It is a potential red flag if too much revenue is concentrated within a few
large accounts or contracts. If fewer customers make up the majority of
revenue, that’s there is a significant risk to the business that needs to be
vetted.

On the other hand, if the largest customer is less than 10% of revenue, that
indicates low customer concentration.

ACV - Average Contract Value

ACV is a metric that shows the average yearly value of a customer’s

subscription.

ACV helps companies figure out their strategy for sales and marketing.
Calculate your company’s ACV by dividing the value of the contract by the
total years of the contract.

Net Revenue Retention

Net Revenue Retention (NRR) or Dollar Retention measures how much of

your revenue is generated by a cohort of customers each period relative to
its original size.

NRR takes expansion revenue into account and can be greater than 100% if
expansion exceeds churned and contracted revenue. The best SaaS
companies have 120%+ NRR each year. NRR of less than 100% per year is
evidence of a Leaky Bucket and is problematic.
Magic Number

Magic Number is the Net New ARR for a period divided by its sales and
marketing expenses from the prior period. Ideally, the ratio should be
greater than one.

Gross Margin

Gross Margin reflects a company’s margin after subtracting the cost of

goods sold (COGS) from revenue.

For SaaS companies, COGS typically consist of subscription costs on a

monthly or annual basis to keep the product operating. There can be good
reasons for lower gross margins early in a company’s lifecycle, but in the
long term, SaaS companies should have a Gross Margin of over 60%.

low Gross Margins can be evidence of a classic automation problem where

the company is putting their human force to work rather than automating
existing workflows.

Net Margin

Net Profit Margin or net margin is the percentage of net income generated
from a company's revenue. Net income is often called the bottom line for a
company or the net profit.
Burn Multiple

Burn Multiple is a company’s Net Burn divided by its Net New ARR in a
given period (typically annually or quarterly).

It is a number of how much the startup is burning in order to generate each

incremental dollar of ARR. The higher the Burn Multiple, the more the
startup is burning to achieve each unit of growth. The lower the Burn
Multiple, the more efficient the growth is.

For fast-growing SaaS companies, a Burn Multiple of less than one is

amazing, but anything less than two is still quite good. If a startup has a
high Burn Multiple but low CAC, that could indicate that sales and
marketing costs have been miscategorized.

Hype Rate

The hype rate is used to measure capital efficiency, which equals Capital
Raised (or Burned) divided by ARR. But we prefer Burn Multiple because it
focuses on recent performance.

Active Users
Daily / Weekly / Monthly

The number of users who open and engage with your app/software on a
daily, weekly and monthly basis.
Churn Rate

SaaS companies rely heavily on subscription services and the revenue it

brings.

Customer churn is a primary concern. Customer churn refers to the

measurement of customers or accounts that drop a business’ services
within a given period of time. By determining the churn rate, SaaS
companies can gain a deep understanding of how and when customers
interact with their products, which enables them to form better retention
strategies.

Once a customer leaves a company’s services, the race to attract and retain
a new one begins. It is critical for scaling companies to determine
customer churn rate, as it provides deeper insight into the overall health of
the business.

DAU / WAU

The ratio of daily active users to weekly active users.

A good metric for most SaaS startups is 60% DAU/WAU during non-holiday
weekdays, meaning that the typical weekly user visits the site 3 out of 5
weekdays.

DAU / MAU

The ratio of daily active users to monthly active users.

A good metric for most SaaS startups is 40% DAU/MAU during non-holiday
weekdays, meaning that the typical monthly user visits the site at least two
weekdays per week or 8 times per month.

NPS - Net Promotor Score

The Net Promoter Score (NPS) enables companies to assess the loyalty of
their customer base.

NPS allows companies to quickly determine how their customers feel

about their products. Companies often measure NPS through the use of
simple survey questions, which usually address consumers’ willingness to
reuse a product or recommend it to someone else.

For young SaaS businesses, this metric is especially useful, as it allows

organizations to make any needed adjustments to their product or services
early on so they can keep growing their customer base.

ARPA - Average Revenue Per Account

Or ARPU - Average Revenue Per User in most cases

The average revenue per user (ARPU) is the average amount of revenue you
earn from each of your active customers monthly.

Activation Rate
Activation rates, sometimes also known as sign-up to paid conversion
rates, are the percentage of your customers that go from newly acquired to
performing an activity that signals they are using your software.

Calculate the activation rate by dividing the number of users who complete
an activity by the number of new users who signed up.

Customer Attrition Rate

Attrition Rate also known as customer turnover is the rate at which you lose
customers over time. This metric differs from the churn rate in that it
doesn’t account for the net total including new users. It focuses only on
customers lost.

This measure is vital to track monthly or annually to spot an uptick in

customer dissatisfaction. Calculate your customer attrition rate by dividing
the number of customers leaving by your total number of customers in the
period.

Net Retention Rate

NRR is a churn metric. It measures the percentage of recurring revenue

from existing customers.

NRR looks at a company’s success in SaaS renewal metrics, such as

extending contracts and earning additional revenue from its customer
base.

In coms cases, it is also synonymously used with Net Revenue Retention

Lead Velocity Rate

Lead velocity rate is the percentage increase of qualified leads over

months.

Calculate LVR by subtracting the qualified leads for the last month from the
qualified leads for the current month, and dividing the difference by the
leads for the previous month.

Average Selling Price

ASP is the average price a product sells for across all customers. ASP is
important because it shows investors what clients are willing to pay for
your software.

Calculate ASP by dividing your software revenue by the number of

customers.

Conversion Rate

Conversion rate is the most common KPI used by many marketers to

understand how much traffic is converting into leads, or sales.

You should be calculating conversion rates through these conversions;

 ● Form submissions
● Making a purchase
● Call tracking
● Lead Magnet downloads
● Newsletter signup

+ many other conversion types.

Behavior Flow

Behaviour flow is essentially understanding "end-to-end" where users land

on your site, to than the other pages or destinations they visit.

Trial Period to Conversion Rate

The number of users who pay at the end of their trial period typically after
7/14/30 days of trailing your product.

Things to consider;

● How effective are your total efforts within product and customer
service to turn trial users into paying users?
● How effective is your onboarding process for new/trial users?
● What can you do within the product to encourage activation?
Traffic by Source + Medium

Understanding where your users come from and where they land on your
website is crucial. Knowing where they come from helps make better
decisions around strategy + investment into channels that acquire more
potential users/customers.

Website Traffic

Understanding and reporting on unique + repeat visitors are important to

making better decisions on growth. However, it's important to not grow an
unhealthy obsession with these metrics.

Choose whether monthly, weekly or daily metric matters to you.

A metric that does matter that coincides with daily, weekly + monthly
windows is repeated visitors/rate of returning visitors. Overlap this with
other key factors such as landing page destination + source/medium, and
you can learn valuable information for optimisation.

Cohort Analysis

Cohort Analysis helps you analyse how users interact and engage with your
product. There are two main types of cohort analysis;

● Acquisition cohorts (website/when they signed up)

● Behavioural cohorts (how they use your product)
Your cohort analysis measurements can include;

● How often do users engage within their first 14 days?

● How often do they come back?
● When do they churn?
● Which features retain users or are frequently used by users?

Existing Customer Revenue Growth Rate

Working out ways to achieve more revenue from your existing customers
through upsells or other methods helps increase the LTV of your customer
base without the need for acquisition costs.

Email Open Rate

Email open rate is the most important metric when it comes to email
marketing (along with the clickthrough rate) and indicates the number of
users who opened your email, compared to the total number of people you
sent it to.

Click Through Rate

Clickthrough rate (CTR), it’s the ratio of users who click on a specific link to
the number of total users who view an email campaign.
Deferred Revenue

Deferred revenue is money received in advance for products or services

that are going to be performed in the future.

Revenue Growth Rate

MoM / QoQ / YoY

Revenue Growth Rate measures the month-over-month percentage

increase in revenue. It’s one of the most common and important startup
KPIs. The Revenue Growth Rate provides a solid indicator of how quickly
your startup is growing.

Gross Profit
Total revenue - Cost of goods sold (COGS)

Net Profit
Net Profit is surplus cash (money made) after all expenses have been paid

Virality

The virality / Viral coefficient is the number of new users or customers the
average customer generates. This can be through a formal business
referrals program or simply through sharing and inviting others customers
to use your product - but the key is that these users also convert to paying
customers or users.

Platform Risk

Simply it is the dependence on one source of traffic or customers.

Also getting too tied up with the current algorithm for existing marketing
channels.

Credit: Founder’s Book