6 startup key performance indicators that’ll help maintain the health of your business!

key performance indicators

6 startup key performance indicators that’ll help maintain the health of your business!

6 important startup key performance indicators 

Goals are the main finish points for everything we do in life. In fact, goals are the peak of the mountain of our demand, once we reach the topmost point of the mountain, we succeed in whatever our demand was! When we set up any goal and try to reach them, we will be able to know how far we are from being successful. When it comes to the business aspect this story would be the same. We all start our business with a group of different goals from short to long-term ones. We would use our resources in order to reach them. Imagine you have started your startup in the field of digital marketing for other businesses and one of your main goals is to have 7% of user growth every week. This goal helps you and your team keep on the right track and make sure the start-up is moving toward its goals! Now, to make everything quantitative and check on a regular basis that how good or bad our startup is doing, we will use the startup key indicators! But, among all of the indicators, which one should we consider for our business? Let’s take a look at the essential startup KPIs.

Table of contents

What are startup key performance indicators?
The 6 essential startup key performance indicators
  • Customer Acquisition Cost (CAC)
  • Daily Average User (DAU)
  • Customer Retention Rate (CRR)
  • Average Revenue Per User (ARPU)
  • Monthly Recurring Revenue (MRR)
  • Revenue Growth Rate (RGR)
Blog at a glance

What are startup key performance indicators?

Before checking out the essential startup key performance indicators, let’s understand what they actually are. Startup KPIs are quantitative metrics used to measure the performance of the business. They evaluate the company’s success toward reaching the goals in different areas. These areas can be divided into two levels; high-level KPIs and low-level KPIs. High-level key performance indicators measure the overall performance of the company. On the other side, low-level KPIs measure the performance of different parts of the company or different individuals such as marketing and sales, manufacturing, project execution, system operations, etc. As a result, I can say the low-level startup key performance indicators are more specific in result! The things that are involved in these measurements are the inputs, like resources, outputs, the product and everything involved for it, the process, accomplishments, and the business milestones. All of these factors can show us if our company is doing good or bad, is it on the right track toward its objectives or not!

The 6 essential startup key performance indicators

the essential startup key performance indicators

The startup key performance indicators give us useful data about how we are actually performing. When we start a business, especially startups, we need to check on a regular basis whether we are on the track or off. For startups this basis is much shorter, as the potential growth for startups is very high, especially in the initial days, we need to check our progress in a shorter span of time. Here the high-level KPIs would not be necessary, as they will show us data that are for longer periods of time, such as cumulative annual growth rate (CAGR) or annual recurring revenue (ARR). These indicators are used when the business has operated for over a year. Here our focus will be on the low-level KPIs which are much more specific and will usually give us useful information in order to show us how far or near we are to the progression. There are many different indicators to set for measurements, however, we should only choose a few, usually between 3 to 5 KPIs for our business. Here I will introduce 5 essential startup key performance indicators that will be useful for our start-up business, especially in its initial phase.

Customer Acquisition Cost (CAC)

This KPI calculates the average amount of money used to acquire new customers for the business. The amount of money that should be considered in the CAC is the sum of every money spent directly or indirectly on obtaining new customers, this includes the paid per click (PPC) costs, content marketing and SEO, digital ads, different campaigns plus the amount of salary you are paying to your marketing team. This is one of the most important startup key performance indicators because it helps us to understand that the average amount we spend to get every customer is in our favor or not. Does that customer bring more value to my business or not (by buying my products/services)? This type of startup KPIs have two ways of calculation, one is considering the customers that started using our products without spending any money on acquiring them (customers obtained through word of mouth or other ways without cost), while the other way is calculating only those customers obtained by spending money.
  • Blended CAC: Calculation of the total money spent for customer acquisition by considering every customer obtained (both the ones that money was spent for attracting them and those who were obtained at no cost).
  • Paid CAC: Here, only those customers that were acquired through channels that we spend money on are considered!

Calculation: (CAC) = Total money spent for marketing and other channels of acquiring customers ÷ (divided) Number of customers obtained in the specified period of time.

Daily Average User (DAU)

This startup key performance indicator is mostly important for online providers, those start-up businesses that provide their products/services online. This KPI helps you to calculate the average number of people that use your platform on a daily basis. The important point to be considered here is that we should not consider those users who actually do not do any specific action on our platform, we should set certain actions that if any user did them on the regular basis we will consider them in DAU calculation! This indicator is used to help us know that if our customers use our products/service and how often they use it. It helps us to get feedback on how our solutions to people’s problems are working, and what refinements we should dor them. To calculate this startup KPI, we should consider who are our users as well as setting up certain actions that those users should do in one day. For example, in an email marketing campaign, the users are every people who sign up with their emails and the certain action that they must do is signing up with their emails! This startup key performance indicator is also calculated on a weekly or monthly basis too. (WAU, MAU)!

Calculation: (DAU) = Total number of users doing the specified tasks in one day.

Customer Retention Rate (CRR)

CRR calculates the number of existing customers retained over a specified period of time that can be weekly, monthly, quarterly, or …. This is one of the most useful performance indicators because it will help you understand your performance in keeping your customers faithful to you, getting feedback on why your users did not use your product/service again along with how far our business is from satisfying its customers! Obtaining new clients is a sign of improvement for the company, but retaining customers and making them loyal is like that improvement multiplied by 3, as they will use more products/services from us, it is more likely to introduce us to their surrounding people as well as reducing our cost for bringing more customers. Customer retaining will also result in an increase in return of investment (ROI)! In fact, this startup key performance indicator helps us recognize how accurate our business is on its track!

Calculation: (CRR) = Number of customers retained at the end of the specified period – (minus) total number of new customers obtained during that period
All of them ÷ (divided) by the number of our customers at the beginning of that period x (multiplied) by 100

startup key performance indicators

Average Revenue Per User (ARPU)

(ARPU) is one of the useful KPIs for every business. It measures the amount of revenue a company can generate from each customer over a specified period of time. In other words, the average amount of income a business expects to make in the expected span of time (usually monthly in this situation) from the number of subscriptions made by its users is the average revenue per user. This KPI is usually used for businesses that are based on the subscription model. However, there is another performance indicator called average revenue per unit that is the same as average revenue per user with the difference that it is measured by each unit sold by the company, useful for the companies that sell tangible products! Indeed, ARPU is one of the most useful startup key performance indicators that will help us to recognize our business growth by calculating the growth of income. This measurement helps us set the best strategies for our business in order to keep it on the right track. This is also a metric to show us how well we are doing compared to our competitors.

Calculation: (ARPU) = Total revenue (in the specified period of time) ÷ (divided) by the total number of users (or units in case of average revenue per unit)

Monthly Recurring Revenue (MRR)

This is one of the startup KPIs that is used in subscription model businesses. It calculates the expected revenue that it will generate each month. This is based on the plans and ad-ons that each user buys on a monthly basis. For example, you have a website that provides motivational quotes every day for the users. If the subscription for the monthly plan is $10 and you have 100 users buying this plan, your MRR would be $1000. This is another useful startup key performance indicator that will help you understand how well or bad your company is performing. MRR is useful in different areas. One of these areas is tracking the performance of your business, is it facing growth in its revenue or not, or is it retaining its customers or losing them. Another area is it helps us forecast the average revenue and make plans for marketing and other important things upon that. Recurring revenue is also calculated on a yearly basis with the (ARR) KPI.

Calculation: Average revenue per user (in the desired month) x (multiplied) by the total number of users/accounts (in that month)

Did you know?

MRR itself has different types itself including:

New MRR: additional revenue gained from new users joined

Churn MRR: lost revenue due to canceled subscriptions

Expansion MRR: the additional revenue gained from the same number of users as the previous month

Downgrade MRR: the amount of deducted revenue from the same number of users as the last month

Net New MRR: the increase or decrease of revenue compared to last month based on new + expansion – Churned MRRs

Revenue Growth Rate (RGR)

One of the simplest yet useful startup key performance indicators is the revenue growth rate. This measures the amount of growth your revenue had in a particular period. The period of time for this performance indicator can be monthly, quarterly, or even yearly. This growth can sometimes be equal to zero or even it may be a shrink in the revenue. In fact, this KPI helps us to understand how healthy our business is doing. Just like MRR, revenue growth can help us in many areas such as funding and resource allocating plans.

Calculation: revenue of current period – (minus) revenue of the previous period
The result ÷ (divided) by the revenue of the previous period x (multiplied) by 100

Key performance indicator

Did you know?

Revenue metrics in startup key performance indicators are the most important performance indicators to be considered for our business.

Blog at a glance

Starting a startup can be hard most of the time, especially when we are not familiar with the required knowledge and skill. Everything in life, as in building a start-up business, needs a set of goals to be aimed for. Setting up goals for our business helps us know where we are heading and what we want to accomplish. However, setting goals alone cannot help us determine how well we are operating to reach our goals, therefore when we are starting a startup we need to set our goals along with startup key performance indicators in order to measure its metrics to understand how healthy our business is. Startup KPIs help us measure our performance with quantitative units that make everything more precise for us. The result of setting up goals and KPIs is that we will be able to examine how well we are going through our path, are we making improvements or not, how long does it take to reach our objective milestones, as well as recognizing our performance compared to our competitors in the market. Performance indicators also help us in our strategic, funding, marketing, and overall plans. Learning about the KPIs would help us understand our milestones for each goal, therefore they play a significant role in being successful in our business.

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