9 Metrics To Help You Make Wise Decisions About Your Startup
Startups often feel like they are at the
center of a massive crossroads. Each path has at least one person waving them on
with the promise of a growth hack that will turn their crawling, infant business
into one that walks and talks.
Who do you listen to and which metrics do you
use to measure your startup? It’s a difficult pair of questions to answer and
the constant chirping of everyone sharing their opinion on what’s important for
your business doesn’t help.
The truth is that you can’t listen to the
majority of these outside voices, no matter how much marketing experience they
have. Your startup has its own set of challenges and obstacles that only you
can understand and appreciate because you’ve been there from the very
beginning. For the startup, you need to understand what is sem and how it works.
So, let’s back to the point.
Ultimately, you need to make a decision on the
metrics to listen to. To help you make that choice easier, here are 9 metrics
that will impact your startup.
1.) Revenue
At the end of the day, it’s all about dollars
and cents, right? If your company is generating positive revenue, then things
are looking good. However, startups often pay more than they bring in because
the costs to acquire customers and establish brand awareness are higher.
Whenever you make a big decision for your startup
or consider investing in a new tool, channel, etc., you should think about
whether it will hurt or help your revenue. That said, it’s important to
understand that revenue isn’t always the best metric to obsess over, especially
in the early stages.
2.) New Users
Your startup needs to grow its customer base.
For many startups, new users are the lifeblood of your company. You need to
measure how many new users or customers your startup is acquiring. A high
conversion rate is a great way to know if your product has feet to stand on. On
the other hand, if conversions are low, people may not be interested in what
you have to offer.
3.) Customer Acquisition Cost
The problem with conversions is that new
customers cost money. It’s actually not difficult to generate new users for
your product. The challenge is acquiring customers at a profitable cost. If
your customer acquisition cost (CAC) is too high, then your profits are slim.
You may even be losing money! This is why some marketers consider CAC to be a
common killer for startups.
4.) Customer Lifetime Value
To really calculate the viability of your CAC,
you need to also consider the lifetime value of your customers. How much do you
expect they will spend with your business? You can roughly estimate your customer
lifetime value by looking at how long a customer stays with your business and
how much they spend per month. Then, multiply the figures together.
Ideally, your lifetime value should be much,
much higher than your CAC. This will help guarantee profitability.
5.) Retention
Once you’ve spent the money to acquire
customers, you need to make sure you keep them! It’s common for startups to
become so obsessed with new customers
that they forget about the ones they’ve already got.
Not only does it cost more to acquire new
customers than keep existing ones, but it is far easier to re-engage or upsell
a current user than it is to close the deal with a new customer.
6.) Churn
It’s hard to discuss retention without also
looking at your churn rate. Churn describes how many customers you are losing
and how quickly. You’ll always lose some customers; that’s normal. But, losing
customers rapidly or at the same point in time can be the result of a bigger
problem that needs to be addressed.
It may be a problem with your product that you
haven’t identified yet! If you can anticipate churn, then you can devise plans
to retain customers that you would have otherwise lost.
7.) Engagement
In the early stages of your startup, building
buzz and interest is crucial. You’re a nobody in a crowded town and you need to
build awareness for people to care about your products.
Engagement on social media is a great way to
see if people are interested. It is another way to test the viability of your
products. If people are buzzing about it, then you’ll have no problem acquiring
customers at a low cost in the next stages.
8.) User Sentiments
Engagements will also shed insight into how
users feel about your products. People aren’t shy about sharing their opinions!
The positive and negative sentiments that they share are incredibly valuable.
You can quickly determine what’s working, what isn’t and why.
Startup businesses should encourage feedback
from users often and pay attention to every sentiment that these users share.
Not only will it help you improve your marketing for acquiring future
customers, but it will also help you understand why current customers defect!
9.) Growth Rate
Growth often happens slowly at first — just a
few small drips from the faucet. Then, it starts pouring out all at once.
Explosive growth can be harmful if you aren’t prepared for it. Thus, you need
to keep an eye on your growth rate.
This is also known as your viral coefficient.
It’s a measure of your conversions over several cycles. Are you acquiring customers
faster than a month ago? If so, then it is a clear sign that you are creating a
positive user experience, your product has a fit in the market and your
profitability is high.
A positive viral coefficient can signal to a
startup when it’s time to try and low acquisition costs.
Conclusions
Every metric matter to some degree. The challenge is finding the data that matters the most at the current time.
Startups are in a unique position because they move faster than larger
organizations and face a different set of challenges. This means that the most
important metric for your business is going to change from time-to-time based
on the stage and trajectory of your startup.
By keeping an eye on these 9 metrics, you’ll
be better prepared to identify when these changes happen and where you need to
place the majority of your attention.
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