“It takes discipline to make metrics a priority and even more diligence to collect and analyze the data.”- Sarah Lerche
When building your startup, the financial part is tremendously important—not only in relation to accounting, taxes, payroll, HR, benefits, and insurance but funding and ownership of your company, as well. Funding and ownership are important in all stages of building your startup, and as you go after your next fundraising round it’s essential that you’ve set yourself for success from the start by keeping track of key metrics in a KPI dashboard.
Below you can find seven of those key business metrics to keep track of—to measure your performance, to support your growth, and justify your fundraising round.
• Sales Revenue
Just knowing that you have money in the bank isn’t enough. You must measure your sales—the income you receive when a customer buys your products or signs up for your services. Then, you need to look at why your numbers are increasing or decreasing.
When measuring sales revenue, look at your pricing, the seasons, and your marketing. Know the competitive arena and what might affect your sales. This is one of the most important metrics to monitor as it will let you know if your startup will succeed or fail.
• Revenue Run Rate
Next, you want to look at how your business is scaling. This helps you measure how your sales are developing over a specified period of time.
When it comes to creating forecasts and picking up on patterns, your revenue run rate can help—you’ll be able to adjust pricing and marketing strategies accordingly.
Your revenue run rate for one year is figured by multiplying last month’s numbers by twelve.
• Customer Loyalty
An often-overlooked metric for new business owners, customer loyalty is vital to your success. After all, it’s easier to keep a customer than it is to get a new one.
Your goal as a startup owner is to build customer loyalty so that they buy and buy again, eventually becoming brand ambassadors for your company and bringing in new business.
How do you measure customer loyalty? Consider these strategies:
- Loyalty rewards program
- Customer surveys
- Feedback at the point of purchase
- Analysis of customer purchase behavior
Know these metrics so you can build your retention rates.
• Customer Acquisition Cost
When you know these metrics, you know how much it costs you to acquire a new customer. This includes all your marketing as well.
This cost helps you determine the value of your marketing strategies and whether they are too expensive or spot on. You can expect your customer acquisition cost to go down as your business grows, and people start to recognize your brand.
You determine customer acquisition costs by dividing your total acquisition expenses by the total number of new customers over a specified period.
• Burn Rate
You want to know how much cash goes out your door every month. Salaries, overhead, marketing, and other expenses make up your burn rate.
This metric is crucial to your success in running out of money is a top reason startups fail. Your investors really want to know your burn rate. They want to know if (and when) you’ll start generating a profit.
• Profit and Loss
This metric helps you determine if you are charging the right amount for your products or services. When you calculate profit and loss, you want to include the fixed and variable costs of operation. Know what you spend and lose each month.
Know how much you are selling and how much is walking out the door for rent, utilities, insurance, taxes, marketing, benefits, and salaries.
• Labor Hours
How long does it take your employees to do their jobs?
You can bet that employee salaries are one of the most expensive parts of doing business, so you need to stay on top of it. Use these metrics to fine tune your processes. Staying on top of labor costs is important to keep moving forward.