Being a successful entrepreneur means being able to consider and balance everything from your clients’ perception of your startup to how much capital you need to continue developing the business. The problem with striking that balance is knowing about core startup metrics and how to measure what’s working and what’s not.
Taking a close look at what you can measure will help you keep a pulse on the viability of your startup and change the course if you see that something doesn’t work. There’s a vast array of software and systems you can explore to help you along the way; marketing tools (Google analytics for example) to collect all the data or key performance indicators to estimate your startup chances to succeed.
So what are these metrics and what key metrics in business do you need to use first?
If you’ve just started thinking about your success metrics and don’t know yet which are really important in your case, you should begin by researching metrics other companies in your industry use.
It doesn’t matter what you are launching — fintech, SaaS, ecommerce or media, there is always somebody who’s experienced this stage of a startup to some extent and can share their experience; you can almost always find experts to discuss what metrics will be better for your business.
Are You Measuring the Right Things?
Of course, every business is unique and each needs specific figures that need to be measured separately. For example, mobile products hinge largely on MAU/DAU, bounce rate is particularly important for media, average order value and the percentage of returning customers (or shopping cart abandonment rate) is huge for eCommerce sites etc.
But there are metrics that are standard for every online business that shouldn’t be ignored when launching a startup. Here is a list of basic metrics that will help you measure your startup success in terms of customer and business.
All website traffic — this is an essential metric that tells you how many people visit your website. This metric’s especially important if you run a blog or media portal, where your advertising revenue is largely dependent on number of visitors. Traffic also impacts other industries’ sales, in which case, you would want to examine from a lens of quality rather than quantity.
Conversion rate (CR) shows you the number of visitors who took a desirable action (filled form, registered, bought). Conversion metrics, important measures of profitability in sales, show you the result of your work.
Traffic to Leads Ratio — This lead conversion metric shows you how many of your website visitors convert to leads. It is useful because it tells you the quality of your website traffic. It is especially important for businesses in which your website serves as a major business tool such as eCommerce or SaaS.
Leads to Customers Ratio — this is more a measure of your sales success. This metric is easy to define: simply divide your total number of sales by your total number of leads, and you’ll get a ratio that defines your sales success independent of your marketing efforts. If your close rate is low, any drop in revenue or overspending could merely be a symptom of inefficient final sales strategies.
Customer acquisition cost (CAC) is the final cost of all the marketing efforts that were required to attract one client. This is one of the determinants of whether your company has a viable business model; demonstrating that you can maintain a low CAC while scaling the business. If you want to calculate it, just divide all the costs spent on attracting a new customer (marketing expenses) by the number of customers acquired in the period the money was spent. Want to dig deeper? Just calculate the costs divided by channels and you will see what channel works and what channel is just a budget drain.
Customer lifetime value (CLV or LTV) — this is the company’s income, received from one client throughout the lifetime of that customer’s interactions. CLV is one of the most important indicators in business — especially for e-commerce. You should track this number closely because if the cost of attracting a new customer (CAC) “outweighs” the lifetime value of the customer (LTV) your company could go into the red.
The success of a product depends not only on the business side, but also on how people like, react and refer it. So these examples of customer success business metrics that relate to customer success shouldn’t be ignored either.
Customer Success and Product Engagement Metrics
Retention or churn rate — churn is simply the number of customers who stop visiting (using) your website within a specified time-frame.
Referral rate – the volume of referred purchases as a % of your total purchases.
These basic key performance indicators examples are “must-have”, but eventually you’ll determine the best metrics for your business as you continue to learn and develop your business.
So, set up a meeting, start a brainstorm, and establish some baseline metrics that you and team think will work the best for your business and build up from there.
No matter what others measure (website traffic or just “likes” in social media) — only you know what numbers will truly impact and inform your startup success.