The one thing that distinguishes living things from non-living things is growth. So it is only natural that if your business is alive and thriving, it is expected to grow. Otherwise, that would mean the business is well…..dead in the waters. As an entrepreneur, it is essential to know if your business is growing, and by how much. But measuring growth, especially that of a startup can be very challenging. The reason is that several metrics can be used in analyzing business growth. Some of these metrics are easy to apply, actionable, and are effective growth indicators for any type of business, while some are a bit more complicated and unreliable in certain situations. After going through several growth metrics, we have sieved the chaffs from the grains to come up with the top 18 metrics that we believe will help you effectively monitor and analyze your business growth. Before jumping into the list, maybe you'd like to know why you should bother about growth metrics, here is why.

Why Are Growth Metrics Important?

1. Track the growth of your startup by tracking its revenue
2. Know high-margin products, or services that hold the highest revenue potential
3. Understand what’s driving your customer base and use this information to improve your marketing campaigns 
4. Find the weak link in your business and make the necessary changes. 
5. Drive up investor's interest in your startup

18 Metrics To Monitor Your Business Growth

The Gross profit margin (GPM) measures the difference between revenue earned and the cost of production or goods. The GPM is expected to be fairly stable over time and a huge fluctuation in the margin could mean either the expenses are too high or the sales are too low. Of course, it could also be a positive indication of more sales at a lower cost of production. In that case, you could use the GPM to identify high-margin products which of course should become the target of your marketing campaigns. 

This metric answers the question, what value does your customer add to the business? The customer lifetime value gives an estimated value of your customers over time. It can be used together with the customer acquisition cost to determine if the company is making any returns on its investment in sales and marketing. For startups that are still in their early stages, calculating the lifetime value of customers can be difficult. This is because the business is yet to have any “long-term” customers. However, startups in mid-phases can effectively measure how much value they have gotten from their customers.

This is the number of users who use your product or service at any given time. Whether it is a website, an application, or a device (which explains why most manufacturers request permission to track user activities), I digress. Two sub-metrics under the Active users metric are; Daily Active Users (DAU) and Monthly Active Users (MAU). The daily active users metric measures the number of active users interacting with a product or service in a day. While the Monthly active users metric measures the number of active users interacting with the product or service in a month. A business could have over 500,000 registered customers but still does not see a correlated increase in revenue. This is why it is important to monitor this metric to determine what needs to be done to improve customer engagement. 

Sign-ups refer to the total number of new customers who subscribe to use your product or service. Again, this metric is most relevant to SaaS companies. Although it is not considered to be a strong growth metric because they only measure the number of customers who registered but not the number of customers who are actively using the product or service. The solution for this is simple and that’s using it in association with the active users metric discussed above. On its own, signups can indicate how effective your marketing strategy is. A good marketing strategy will 

How much does it cost your business to gain a customer? The customer acquisition cost takes into account the cost of marketing and sales, salaries, cost of procuring equipment, and overhead expenses involved in getting new customers. If your CAC value is low but effective, then it is profitable. On the other hand, if you have a high CAC value but a low customer acquisition rate, then you need to change your marketing model. Since a company can have different marketing channels, this metric can be used to track the performance of each channel to see which ones are performing well and which ones are not. 

Next to customer acquisition cost is the customer churn rate. After spending so much to get a customer, there is still work that needs to be done to retain the customers. Customer churn rate shows the rate at which your startup is losing customers at any given time. If the rate is low, it means that your business is retaining most of its customers but if the rate is high, it means that your business is losing most of its customers. Customer churn rate is most important to startups with a subscription model and B2B companies that are customer-centric. This is not to say that startups with a different business model should neglect this metric since it indicates how satisfied their customers are. 

The metric measures the number of customers that your startup retains over a given time. Customer retention rate is the inverse of customer churn rate. So instead of looking at how many customers you lost, you are instead focused on the ones who stayed with the company. Similar to the churn rate, the retention rate also tells you how well your startup is performing in the customer service department and how your customers feel about your product and services in general.

The revenue churn rate is the fraction (or percentage) of revenue that is lost in a given time. When customers cancel their subscription, downgrade from their usual plan, or stop using your product or services, then there is a churn in revenue. SaaS companies are mostly affected by this metric, however, other business models need to be aware of their revenue churn rate as well. This is because it acts as a compass that indicates a problem with customer satisfaction. A huge fluctuation in the revenue churn rate would mean an increase in customer churn rate as well. You can compare the two to find out if you’re losing your long-term or high-impact customers/account or not. 

Marketing is the second most important aspect of any business. A good marketing strategy generates quality leads which improve the chances of making sales. But how can measure how well your sales are performing? By looking at the Average Sales Cycle Length. This metric measures the duration of time it takes from initiating a sales contract to closing a deal. If the process takes longer than usual, then there might be a problem in your marketing/sales department. However, it is good to keep in mind that many factors influence this matric and one of them is what phase your business is as well as your competition. Either way, this is one metric you should not overlook. 

This metric measures the number of users who complete a specific milestone in your onboarding process. A low activation rate is an indication that there is something wrong that is making users bail out on you. This may be because the process is complicated and not user-friendly. In that case, you need to optimize the process. Onboarding is important in customer retention. A customer who feels confused during the onboarding process is less likely to subscribe to a service or try your product (if you offer free trials). If your onboarding process is optimized but there is no change in the activation rate, then you need to reconsider your marketing strategy. Low-quality leads are less likely to go through the onboarding process, hence the low activation rate. 

You might not be a financial expert but this is one financial concept you need to know. Burn rate measures how fast your startup is spending the money available. In essence, how quickly are you cutting through the paychecks of your investors or even your savings? With most startups failing as a result of insufficient funds, it would be a smart choice to follow the credit–debit column of your cashbook closely. To answer the question, how long can my business survive with the available funds, the answer can be found by calculating the burn rate.

This metric is used alongside the burn rate. The Cash Runway metric shows how long your money will last. With limited funds, startup founders need to be very pragmatic and we can’t over-emphasize how important this metric is. Let’s say your startup has $200,000 in Net revenue and a Net Burn Rate of $20,000 per month. That means it will run out of cash in 10 months. This is not a fixed amount, it changes with the company’s revenue and burns rate.

This is the total amount of money made from sales of products or services over time. This metric is mostly applicable to startups having a typical marketplace or e-commerce business model. GMV is not a standalone metric because it does not indicate if the startup is making any profit from the sales. However, it is an easy way of knowing how much money the business is generating. 

Booking is when a customer is committed to spending money with a company. Although bookings are generally not considered revenue, they are a good way of measuring the future revenue of the company. Additionally, bookings can also be used to determine the effectiveness of a startup's marketing and sales strategy by looking at the net revenue. Higher bookings show a higher level of customer satisfaction and vice versa. Bookings can help you determine which of your products or services bring in the most revenue, and how effective your customer acquisition process is. High bookings with low revenue are a sign that there’s a problem with sales that needs to be fixed. Depending on the type of bookings (New, renewal, or upgrade), you would know the number of new customers that patronize your business, returning customers, and customers who are upgrading their plan (for a SaaS company). 

As the name implies, recurring revenue is revenue that the company expects on a monthly or yearly basis. This growth metric can be used to predict the future revenue of a startup by looking at the monthly recurring revenue (MRR) or the annual recurring revenue (ARR). For SaaS startups with high upfront expenses, investors can use this metric to know how much risk is associated with the company. A healthy ARR (for enterprise startup) or MRR can provide access to more funds via revenue-based financing.

For startups with a transactional business model, the total payment volume refers to the total payment transactions that take place on a platform that processes payments. Transactional modeled startups earn revenue through transaction fees charged. So the higher the transaction volume, the higher the TPV and the more the revenue generated. Therefore the TPV metric is good for understanding the direction of the startup in terms of revenue generated. 

This metric measures the number of new customers that are generated by an existing customer. You can use it to measure the success or failure of marketing strategies like referral programs or incentives. The viral coefficient informs you of how happy your customers are. If your existing customers are happy with what you offer, then they are more likely to refer your product or brand to other customers and if not, then they are less likely to refer to anyone. The higher the viral coefficient, the higher the number of new customers referred, and vice versa. Although it could be difficult to track viral coefficients outside the organization’s referral program. However, many companies resort to asking new customers directly if they were referred during sign-ups. 

This is a growth metric that takes into account the future worth of an investment relative to its cost. A positive ROI means that your investments are bringing in more revenue than they cost. A negative ROI means that you’re spending more than you make on any given investment. Although ROI is a simple way of determining how profitable an investment is, some factors must be considered when evaluating the ROI of an investment. These include risk tolerance and time. A startup with limited capital may have lower risk tolerance than an established business. This would be reflected in the type of investment they are willing to undertake. Also, startups are time conscious and an investment that promises a high ROI but takes a longer time to achieve may not be at the top of their priorities. 

Final Note !!!

One of the challenges you may face as an entrepreneur or founder is knowing which metric is best for your startup. We understand how difficult it can be. The vast number of growth metrics is really helpful but it can be difficult to track so many metrics at the same time. This is why it is important to know which metric/s you should prioritize and which ones you should ignore. To help you with that, you can reach out to us at Epirus Ventures. Our goal does not stop at providing you with this information but also empowering you with the resources that you need to grow your business. 

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