Running a start-up requires an obsessive focus on KPI’s. Phil Nadel identified 12 key KPI’s.
12 KPI’s for every start-up:
- Customer acquisition cost (CAC). CAC is the amount of money you need to spend on sales, marketing and related expenses, on average, to acquire a new customer. This measures marketing efficiency.
- Customer retention rate/churn rate. Retention rate is the percentage of paying customers that remain a customer. High retention rate indicates the product’s stickiness with customer to converse is the churn rate.
- Lifetime value (LTV) is the measurement of the net value of an average customer to your business over the estimated life of the relationship with your company. Measures the sustainability of the company.
- Golden metric or CAC/LTV ratio. How much investment does it take to acquire a customer compared how much revenue will that customer generate. Measures business efficiency.
- CAC recovery time. How long it takes for a customer to generate enough net revenue to cover the CAC. CAC recovery time has a direct impact on cash flow and, consequentially, runway.
- Overhead. What the companies fixed costs and reflects the capital efficiency. How many expenses have no direct link with the good sold.
- Monthly burn or burn rate. This is simply the net amount of cash flow for a month when net cash flow is negative. How much cash is flowing out the company in the early investment period.
- Runway. Runway is the measure of the amount of time until the company runs out of cash, expressed in terms of months. Expressed as remaining cash over burn rate. Preferably in the range of 12-18 months.
- Profit margin and Return on Investment (ROI). How much profit is generate. This is an indicator of scalability and sustainability.
- Conversion rate. How many prospects are turned into customers. How many marketing contacts are turned into sales. Measures business process efficiency.
- Gross Merchandise Volume (GMV). GMV is the overall dollar value of sales of goods or services purchased through a marketplace. Measures the companies growth potential.
- Monthly Active Users (MAU). MAU is the number of unique users who engage with the site or app in a 30-day period. Helps to determine the revenue potential. How good is the company in the monetization of its business.