KEY STARTUP METRICS

ARPU reveals how much revenue each customer generates within a given time, typically monthly or annually. It helps assess pricing strategies, track customer engagement, and uncover growth opportunities through upselling or premium offerings. A rising ARPU suggests that your customers see value, signaling growth, while a decline may indicate the need to rethink pricing or improve your product. More info.

CAC quantifies the cost incurred to acquire a new customer. It is calculated by dividing total marketing and sales expenses by the number of new customers acquired. This metric is vital for determining the investment needed to expand the customer base and for assessing the efficiency of acquisition strategies.

Example: If you spend $5,000 on marketing and acquire 50 new customers, the CAC is $100 per customer.

CAR tracks the rate at which new customers are acquired over a defined period. It is calculated by dividing the number of new customers acquired by the total number of customers at the start of that period and then multiplying by 100 to get a percentage. CAR is important for measuring growth momentum and the success of marketing campaigns.

Example: If a startup begins the month with 200 customers and acquires 40 new customers, the CAR would be 20%.

Cash Burn Rate shows the rate at which a startup depletes its cash reserves, calculated monthly. It is critical for financial planning, helping startups understand how long they can operate before needing additional funding or becoming self-sustainable.

Example: If a startup begins with $100,000 in cash and ends with $80,000 over two months, the burn rate is $10,000 per month.

Cash Runway indicates how long a company can continue to operate with its current cash reserves. It is calculated by dividing cash on hand by the monthly burn rate. This metric is crucial for startups to gauge their financial sustainability and plan for future funding needs.

Example: If a startup has $100,000 in cash and a monthly burn rate of $10,000, the runway is 10 months.

Churn Rate measures the percentage of customers who stop using a company’s services over a specific period. It is crucial for understanding customer retention, guiding improvements in customer service, and enhancing product offerings.

Example: If you start with 200 customers and 20 leave, the churn rate is 10%.

CRR calculates the percentage of customers a business retains over a given period. It is essential for assessing customer satisfaction and guiding loyalty programs. CRR helps predict long-term revenue and refine customer engagement strategies.

Example: If you start with 100 customers and lose 10, the CRR is 90%.

EBITDA Margin reflects a company’s operational profitability before interest, taxes, depreciation, and amortization. It is calculated by dividing EBITDA by total revenue. This margin is key to understanding operational efficiency without the distortions of accounting and financial policies.

Example: If EBITDA is $10,000 and total revenue is $50,000, the EBITDA margin is 20%.

GMV totals the sales value of merchandise sold through a company over a certain period. It is crucial for e-commerce platforms to gauge the total transaction volume. GMV highlights the scale of business activity before accounting for any costs or fees.

Example: If an e-commerce site sells 100 items at an average price of $50 each, the GMV is $5,000.

Gross Profit Margin, calculated by subtracting the cost of goods sold (COGS) from revenue and then dividing the result by revenue, indicates the percentage of revenue that exceeds the cost of goods sold. It measures the efficiency of core operations and is pivotal for pricing strategies and assessing financial health.

Example: If revenue is $200,000 and COGS is $150,000, the gross profit margin is 25%.

LTV estimates the total revenue a business can expect from a single customer over the duration of their relationship. It highlights the long-term value of customer relationships and guides strategic marketing investments and customer service enhancements.

Example: If customers typically spend $50 per purchase, purchase 10 times, and stay for 3 years, LTV is $1,500.

LTV/CAC Ratio compares the lifetime value of a customer to the cost of acquiring them. It provides a measure of the profitability and sustainability of acquiring new customers. High ratios indicate a cost-effective marketing strategy.

Example: If LTV is $1,500 and CAC is $150, the LTV/CAC ratio is 10.

NDR measures the revenue retained from existing customers, factoring in upgrades, downgrades, and churn. It is calculated as end-period revenue from existing customers divided by start-period revenue. NDR is vital for understanding the value generated from current customers over time.

Example: If starting revenue is $10,000 and ending revenue, after adjustments, is $9,500, the NDR is 95%.

Net Profit Margin, found by dividing net profit by revenue, shows the percentage of revenue that remains as profit after all expenses. It's a direct indicator of a company's financial health, influencing investment decisions and operational adjustments.

Example: If net profit is $5,000 and total revenue is $25,000, the net profit margin is 20%.