As a startup, it’s essential to track and measure the performance and success of your business. Key Performance Indicators (KPIs) are metrics that can help you do just that. By regularly monitoring and analysing your KPIs, you can identify areas for improvement, set goals, and make informed decisions to drive growth.
Annual Recurring Revenue (ARR) is a measure of the predictable and recurring revenue that a business generates from its customer base on an annual basis. It’s similar to MRR, but calculated over a longer period of time. To calculate ARR:
ARR = MRR * 12
Average Revenue Per Account (ARPA) is a measure of the average revenue generated from each customer account. It’s a useful metric for understanding the revenue potential of individual accounts and for setting sales and retention goals. To calculate ARPA:
ARPA = Total Revenue / Number of Customer Accounts
Gross Profit is the total revenue minus the cost of goods sold. It represents the amount of money a company has left over after paying the direct costs associated with producing its goods or services. To calculate gross profit:
Gross Profit = Total Revenue – Cost of Goods Sold
Total Contract Value (TCV) is the total revenue expected to be generated by a customer contract over its lifetime. It’s a useful metric for understanding the value of long-term customer relationships and for setting sales and retention goals. To calculate TCV:
TCV = ACV * Contract Length (in years)
Annual Contract Value (ACV) is the total revenue expected to be generated by a customer contract over a one-year period. It’s a useful metric for understanding the value of customer relationships on a yearly basis and for setting sales and retention goals. To calculate ACV:
ACV = Total Contract Value / Contract Length (in years)
Deferred Revenue is revenue that has been received by a company, but has not yet been earned. It represents the amount of money that the company has a legal obligation to deliver in the future. To calculate deferred revenue:
Deferred Revenue = Unearned Revenue
Billings is the total amount of revenue that a company generates in a given period, including any unearned revenue. It’s a useful metric for understanding the overall revenue performance of a business. To calculate billings:
Billings = Total Revenue + Unearned Revenue
Concentration Risk is the risk that a company’s revenue is heavily dependent on a small number of customers or sources of revenue. This can make the company vulnerable to fluctuations or losses in those areas. To calculate concentration risk:
Concentration Risk = (Revenue from Top X Customers / Total Revenue) * 100
Daily Active Users (DAU) is a measure of the number of unique users who engage with a product or service on a daily basis. It’s a useful metric for understanding user engagement and for identifying opportunities to improve the user experience. To calculate DAU:
DAU = Number of Unique Users Who Engaged with the Product/Service in a Given Day
Monthly Active Users (MAU) is a measure of the number of unique users who engage with a product or service on a monthly basis. It’s a useful metric for understanding the overall user base and for identifying opportunities to improve the user experience. To calculate MAU:
MAU = Number of Unique Users Who Engaged with the Product/Service in a Given Month
Number of Logins is a measure of the number of times users have logged into a product or service. It’s a useful metric for understanding user engagement and for identifying opportunities to improve the user experience. To calculate the number of logins:
Number of Logins = Total Number of Times Users Have Logged into the Product/Service
Activation Rate is the percentage of users who complete a specific action or set of actions that are considered necessary for them to fully “activate” or engage with a product or service. It’s a useful metric for understanding the effectiveness of onboarding and for identifying opportunities to improve the user experience. To calculate activation rate:
Activation Rate = (Number of Users Who Completed Activation Actions / Total Number of Users) * 100
Month-over-Month (MoM) Growth Rate is a measure of the percentage change in a metric from one month to the next. It’s a useful metric for tracking the growth of a business and for identifying trends over time. To calculate MoM growth rate:
MoM Growth Rate = ((Current Month’s Metric – Previous Month’s Metric) / Previous Month’s Metric) * 100
Compound Monthly Growth Rate (CmGR) is a measure of the percentage change in a metric on a compound basis, meaning that the growth rate is calculated based on the metric’s previous values as well as its current value. It’s a useful metric for understanding the exponential growth of a business. To calculate CmGR:
CmGR = ((Current Month’s Metric / Previous Month’s Metric) ^ (1 / Number of Months)) – 1
Monthly Churn Rate is the percentage of customers who cancel or stop using a product or service in a given month. It’s an important metric for understanding customer satisfaction and loyalty and for identifying opportunities to improve the customer experience. To calculate monthly churn rate:
Monthly Churn Rate = (Number of Customers Who Churn in a Given Month / Total Number of Customers at the Beginning of the Month) * 100
Retention is a measure of the percentage of customers who continue to use a product or service over a given period of time. It’s an important metric for understanding customer satisfaction and loyalty and for setting retention goals. To calculate retention:
Retention = (Number of Customers Who Remain Customers at the End of the Given Period / Number of Customers at the Beginning of the Given Period) * 100
Gross Churn is a measure of the percentage of customers who cancel or stop using a product or service in a given period, including both voluntary and involuntary churn. It’s an important metric for understanding the overall customer churn rate and for identifying opportunities to improve the customer experience. To calculate gross churn:
Gross Churn = (Number of Customers Who Churn in a Given Period / Total Number of Customers at the Beginning of the Period) * 100
Net Churn is a measure of the percentage of customers who cancel or stop using a product or service in a given period, after taking into account any new customer acquisitions. It’s an important metric for understanding the net impact of customer churn on a business. To calculate net churn:
Net Churn = ((Number of Customers Who Churn in a Given Period – Number of New Customers Acquired in the Same Period) / Total Number of Customers at the Beginning of the Period) * 100
Burn Rate is the rate at which a startup is spending its capital. It’s important to track burn rate because it can help you understand the sustainability of your business and make informed decisions about funding and resource allocation. To calculate burn rate:
Burn Rate = Total Operating Expenses / Time Period
Total Addressable Market (TAM) is the total market demand for a product or service. It’s the potential revenue that a company can generate if it captures a certain percentage of its target market. To calculate TAM:
TAM = Potential Market Size * Addressable Market Share
By regularly tracking and analyzing these KPIs, startups can get a clear picture of the health and growth of their business and make data-driven decisions to drive success.