5 Metrics Every Startup Should Track
MRR, churn, CAC, LTV, and NPS are the 5 metrics every startup needs to track. How to calculate each one and centralize the data for analysis.
To build unique solutions and disrupt the market with innovative products, startups need to deliver measurable and scalable results. Measuring your performance is highly critical, and that is no secret to anyone. However, when it comes to defining the key metrics you should actually track, things tend to get a bit more complicated. With that in mind, in this post we have highlighted 5 crucial metrics that can help startups gain a strategic view of their performance.
What are metrics?
By definition, a metric is simply a way to measure or quantify something. In the business world, metrics are quantitative measurements applied to evaluate the performance of a specific area, person, or the overall results achieved by an organization.
In the startup ecosystem, this is even more critical, as they provide a more accurate overview of the company's status when making decisions. They support scaling your strategy, building more compelling pitches for investors and venture capital firms, and establishing a data-driven approach for everything surrounding your business. When leveraged by startups, metrics make it possible to evaluate business success from multiple angles and perspectives.
For instance: revenue metrics, customer acquisition cost, or lifetime value evaluate the company's financial performance. Meanwhile, metrics like churn rate, NPS, and customer satisfaction can be used to assess the effectiveness of your product or service in the customer's daily routine, bringing predictability and improvements to every user touchpoint.
Beyond results and decision-making, tracking metrics also helps identify patterns and relationships between the main strengths and weaknesses of the business, operations, and product. This allows managers and key stakeholders in each area to design and execute action plans focused on solving bottlenecks and driving optimizations.
Summary: What are metrics?
Metrics are essential tools for companies of all sizes and industries to measure progress and make data-driven decisions. By tracking metrics and effectively analyzing this data, you can uncover areas of improvement, identify bottlenecks, structure better processes, and capture key opportunities. Additionally, metrics are widely used to communicate performance and results to investors and stakeholders.
5 metrics every startup should track
Among the top metrics that startups should monitor, we have highlighted some of the most critical ones to help you track your business performance. Check them out!
Lifetime Value (LTV)
Lifetime Value is a sales metric that helps startups understand where the best opportunities to expand revenue lie, particularly for companies operating on a recurring revenue model (such as SaaS companies offering digital subscriptions or services).
To calculate LTV, multiply the average deal size (average contract value) by the billing frequency per year (such as the number of active monthly payments). This result should then be multiplied by the average customer lifespan (how long customers actively use the tool).
CAC (Customer Acquisition Cost)
CAC is the total cost associated with acquiring a new customer. This metric includes marketing investments, sales team salaries, commissions, and other operational overhead directly tied to acquiring each new customer.
Understanding how much you invest to acquire new customers is crucial for any business, but particularly for startups. This indicator highlights whether the effort dedicated to customer acquisition is actually justified and offset by the value those customers bring back to the business.
Often, in the day-to-day rush of running a business, inefficient processes and expenses creep in. This metric helps signal how effectively your assets are being managed to attract new revenue streams.
Bonus: LTV vs. CAC
Check out this bonus: comparing LTV to CAC! A great way to understand how sustainable your startup's growth is involves analyzing CAC and LTV together. In an ideal scenario, a company should have the lowest possible CAC (cost) and the highest possible LTV (value).
This reflection is vital for businesses, because focusing solely on new customer acquisition without investing in retaining existing customers becomes a major bottleneck in the long run. Several studies show that acquiring a new customer is generally 5 to 25 times more expensive than investing in retention strategies. Comparing CAC vs. LTV helps you understand how efficient those investments really are.
Churn Rate
Churn Rate is the metric that measures the rate at which customers cancel their subscriptions or stop doing business with a company. For startups, tracking this metric is vital to understand whether they are keeping customers happy or if they need to take immediate action to improve retention.
To calculate the churn rate, divide the number of customers who canceled their service by the total number of active customers during that period. A high churn rate means the company is losing customers and needs to build a targeted retention plan, which could include pricing adjustments, customer support improvements, special offers, or UX/product optimizations. Naturally, churn rates vary by industry.
For example: some startups might experience a higher churn rate while others have a lower one, depending on the industry average. That is why it is crucial to benchmark against the market to understand what is typical and what needs improvement.
MRR (Monthly Recurring Revenue)
MRR (Monthly Recurring Revenue) measures a company's predictable monthly recurring revenue. This metric is critical for startups, especially SaaS companies, because they rely heavily on recurring revenue to scale, and it provides a clear view of the business's monthly financial health. To calculate MRR, simply multiply the total number of customers by the monthly price of their active subscription or plan.
For companies with multiple subscription tiers, you must calculate this by multiplying the price of each tier by its respective number of subscribers and summing the results. Understanding and tracking this metric is vital for startups, as it allows them to forecast cash flow for the coming months based on active contracts.
Net Promoter Score (NPS)
Net Promoter Score (NPS) is a metric designed to measure customer satisfaction and how likely customers are to recommend a product or service to others. It is calculated based on a single question: "On a scale of 0 to 10, how likely are you to recommend our company/product/service to a friend or colleague?"
Based on their answers, customers are grouped into three categories: detractors, passives, and promoters. Those who respond with a score of 0 to 6 are detractors; those who score 7 or 8 are passives; and those who score 9 or 10 are promoters. You then calculate the NPS by subtracting the percentage of detractors from the percentage of promoters.
Conclusion
For your startup to become truly data-driven, you must design processes and track metrics that are both measurable and scalable. Another great approach for your organization is to define a North Star Metric (NSM)—the key metric that represents your core product value and guides all strategic decision-making. This metric should be monitored daily, and every initiative across the company should align to impact this goal.
For this reason, choosing the right NSM is crucial for medium and long-term success. A few examples of goals built around an NSM include:
$100 million in e-commerce sales;
1 million active website visitors;
$1 billion in total sales.
This metric must be highly relevant to your business model, easy to measure, and directly tied to financial success. What is your company's North Star Metric? Your decisions need to be backed by real-world data, and tracking these key metrics is the best way to get there.
To learn more about how to kick off your startup's data-driven journey, check out more articles like this on our blog.
To build unique solutions and disrupt the market with innovative products, startups need to deliver measurable and scalable results. Measuring your performance is highly critical, and that is no secret to anyone. However, when it comes to defining the key metrics you should actually track, things tend to get a bit more complicated. With that in mind, in this post we have highlighted 5 crucial metrics that can help startups gain a strategic view of their performance.
What are metrics?
By definition, a metric is simply a way to measure or quantify something. In the business world, metrics are quantitative measurements applied to evaluate the performance of a specific area, person, or the overall results achieved by an organization.
In the startup ecosystem, this is even more critical, as they provide a more accurate overview of the company's status when making decisions. They support scaling your strategy, building more compelling pitches for investors and venture capital firms, and establishing a data-driven approach for everything surrounding your business. When leveraged by startups, metrics make it possible to evaluate business success from multiple angles and perspectives.
For instance: revenue metrics, customer acquisition cost, or lifetime value evaluate the company's financial performance. Meanwhile, metrics like churn rate, NPS, and customer satisfaction can be used to assess the effectiveness of your product or service in the customer's daily routine, bringing predictability and improvements to every user touchpoint.
Beyond results and decision-making, tracking metrics also helps identify patterns and relationships between the main strengths and weaknesses of the business, operations, and product. This allows managers and key stakeholders in each area to design and execute action plans focused on solving bottlenecks and driving optimizations.
Summary: What are metrics?
Metrics are essential tools for companies of all sizes and industries to measure progress and make data-driven decisions. By tracking metrics and effectively analyzing this data, you can uncover areas of improvement, identify bottlenecks, structure better processes, and capture key opportunities. Additionally, metrics are widely used to communicate performance and results to investors and stakeholders.
5 metrics every startup should track
Among the top metrics that startups should monitor, we have highlighted some of the most critical ones to help you track your business performance. Check them out!
Lifetime Value (LTV)
Lifetime Value is a sales metric that helps startups understand where the best opportunities to expand revenue lie, particularly for companies operating on a recurring revenue model (such as SaaS companies offering digital subscriptions or services).
To calculate LTV, multiply the average deal size (average contract value) by the billing frequency per year (such as the number of active monthly payments). This result should then be multiplied by the average customer lifespan (how long customers actively use the tool).
CAC (Customer Acquisition Cost)
CAC is the total cost associated with acquiring a new customer. This metric includes marketing investments, sales team salaries, commissions, and other operational overhead directly tied to acquiring each new customer.
Understanding how much you invest to acquire new customers is crucial for any business, but particularly for startups. This indicator highlights whether the effort dedicated to customer acquisition is actually justified and offset by the value those customers bring back to the business.
Often, in the day-to-day rush of running a business, inefficient processes and expenses creep in. This metric helps signal how effectively your assets are being managed to attract new revenue streams.
Bonus: LTV vs. CAC
Check out this bonus: comparing LTV to CAC! A great way to understand how sustainable your startup's growth is involves analyzing CAC and LTV together. In an ideal scenario, a company should have the lowest possible CAC (cost) and the highest possible LTV (value).
This reflection is vital for businesses, because focusing solely on new customer acquisition without investing in retaining existing customers becomes a major bottleneck in the long run. Several studies show that acquiring a new customer is generally 5 to 25 times more expensive than investing in retention strategies. Comparing CAC vs. LTV helps you understand how efficient those investments really are.
Churn Rate
Churn Rate is the metric that measures the rate at which customers cancel their subscriptions or stop doing business with a company. For startups, tracking this metric is vital to understand whether they are keeping customers happy or if they need to take immediate action to improve retention.
To calculate the churn rate, divide the number of customers who canceled their service by the total number of active customers during that period. A high churn rate means the company is losing customers and needs to build a targeted retention plan, which could include pricing adjustments, customer support improvements, special offers, or UX/product optimizations. Naturally, churn rates vary by industry.
For example: some startups might experience a higher churn rate while others have a lower one, depending on the industry average. That is why it is crucial to benchmark against the market to understand what is typical and what needs improvement.
MRR (Monthly Recurring Revenue)
MRR (Monthly Recurring Revenue) measures a company's predictable monthly recurring revenue. This metric is critical for startups, especially SaaS companies, because they rely heavily on recurring revenue to scale, and it provides a clear view of the business's monthly financial health. To calculate MRR, simply multiply the total number of customers by the monthly price of their active subscription or plan.
For companies with multiple subscription tiers, you must calculate this by multiplying the price of each tier by its respective number of subscribers and summing the results. Understanding and tracking this metric is vital for startups, as it allows them to forecast cash flow for the coming months based on active contracts.
Net Promoter Score (NPS)
Net Promoter Score (NPS) is a metric designed to measure customer satisfaction and how likely customers are to recommend a product or service to others. It is calculated based on a single question: "On a scale of 0 to 10, how likely are you to recommend our company/product/service to a friend or colleague?"
Based on their answers, customers are grouped into three categories: detractors, passives, and promoters. Those who respond with a score of 0 to 6 are detractors; those who score 7 or 8 are passives; and those who score 9 or 10 are promoters. You then calculate the NPS by subtracting the percentage of detractors from the percentage of promoters.
Conclusion
For your startup to become truly data-driven, you must design processes and track metrics that are both measurable and scalable. Another great approach for your organization is to define a North Star Metric (NSM)—the key metric that represents your core product value and guides all strategic decision-making. This metric should be monitored daily, and every initiative across the company should align to impact this goal.
For this reason, choosing the right NSM is crucial for medium and long-term success. A few examples of goals built around an NSM include:
$100 million in e-commerce sales;
1 million active website visitors;
$1 billion in total sales.
This metric must be highly relevant to your business model, easy to measure, and directly tied to financial success. What is your company's North Star Metric? Your decisions need to be backed by real-world data, and tracking these key metrics is the best way to get there.
To learn more about how to kick off your startup's data-driven journey, check out more articles like this on our blog.