Every business, big or small, should be run by metrics. Your business won’t grow if you don’t know your most important numbers – and metrics are the key to knowing which numbers matter and why they matter. This article will go over Twenty power metrics that will help your startup get off the ground and stay there. With these metrics in mind, you can learn how to build a successful business from the beginning!
20 Power Metrics and Terms You Need to Know
1. CPA (Cost Per Acquisition)
CPA is a cost-per-action metric that represents how much you spend on a channel or campaign, divided by how many conversions (e.g., signups) you get. It’s often used in pay-per-click advertising, such as paid Google AdWords.
2. CAC (Customer Acquisition Cost)
CAC is an essential metric in SaaS that tracks how much you spend on bringing in a new customer. It’s calculated by dividing your marketing, sales, and other acquisition expenses by dividing the number of customers acquired. CAC is an important metric because it shows you how efficient your company is at acquiring new customers. If you have a high CAC vs another similar company, it might be time to reevaluate your approach or see what areas you can cut costs to become more profitable.
3. Cost per visitor
The cost per visitor is a marketing performance metric that can help businesses determine whether they are generating a positive return on investment (ROI) from their advertising efforts. Marketers use it to indicate how effective advertising campaigns are at driving relevant traffic to their websites, e-commerce storefronts or other online properties. In most cases, it involves calculating how much was spent on advertising over a given period versus how many unique visitors were generated.
4. Activation Rate
The activation rate is a crucial indicator of growth because it tells you what percentage of users who install an app actually launch it. For example, if your activation rate is 20%, then out of 100 installs, only 20 people actually launch your app.
5. Total Site Sessions
Understanding metrics—and tracking them in your analytics program of choice—will help you figure out whether or not what you’re doing is working. For example, if visits have dropped on your site, perhaps it’s time to change your content strategy. Here are some metrics (and terms) you need to know about
6. Conversion Rate
The amount of number of people who take action on your site or landing page. The conversion rate is typically calculated as a percentage. You’re measuring how many people took action (for example, signing up for a newsletter) divided by how many visited your page. For every 1,000 views of your page or site, did 100 sign up? That’s a 10% conversion rate.
7. Units Per Transaction
In unit economics, it is common to see terms like average order value, gross margin dollars per transaction (not %), and average revenue per user. To calculate these metrics quickly, get your head around units per transaction. It is a really good proxy for how valuable each transaction is for your business: divide total sales by total transactions. The higher your sales ratio over transactions, the more valuable each transaction is for you.
8. Retention Rate
Businesses sometimes think that the retention rate of customers is more important than any other metric when working in the Software as a Service (SaaS) industry. A company with a high retention rate will likely have a low churn rate.
9. Churn Rate
Your company’s churn rate is a metric that calculates how many customers are churning or leaving. The churn rate is often combined with customer lifetime value (CLV), which measures how much each customer is worth over their lifetime. Churn rates vary by industry but generally range from 1-3%. A high churn rate signals that your product may be inferior, while a low churn rate means you provide superior service.
10. ROAS (Return On Ad Spend)
ROAS is a measurement of how well your ads are converting users. It takes into account how much you’re spending on advertising, as well as what revenue your ads are generating for you. For example, if you spend $100 on a campaign and generate $200 in revenue from that campaign, your ROAS is 200% ($200/100 = 2).
11. LTV (Lifetime Value)
The LTV metric is one of your most important, as it indicates how much money you can expect to make from a customer. It’s calculated by dividing their total lifetime revenue (or transactions) by their acquisition cost. With LTV, you can then decide whether it’s worth spending more or less on acquiring a customer.
12. AOV (Average Order Value)
It is a value that measures how much each customer spends, on average, during each order. When you look at your analytics, AOV usually falls under Revenue per Order or Average Revenue per Order. To calculate it for your own business, take all of your orders over a set period of time (like 30 days) and divide it by how many orders you received.
13. Burn Rate
One of a startup’s most important numbers, burn rate, measures how much cash a company uses each month. It reflects how fast money is leaving your business, and you need to keep it low if you want your company to survive.
14. Cash Runway
This is one of those metrics that can be eye-glazing boring, but it’s a key indicator for startup health. Your cash runway is how long your company could survive if it had zero incoming revenue streams. It’s expressed in months, so you might say your business has a 6-month runway (if you have six months of available cash) or an 8-month runway.
15. Minimum Viable Product
An MVP lets you test whether customers will use your product. This is in contrast to traditional surveys and focuses group results that can be misleading. The definition of MVP has changed to “the smallest thing that you can build that allows you to quickly get around the build-measure and learn loop.”
We are a leading company providing MVP Development Services to match your needs and requirements. CitrusLeaf has a team of developers that let you redesign your product in a way that let you generate more revenue.
16. ARR (Annual Recurring Revenue)
ARR is a crucial measurement of startup health and business growth. This statistic shows how much your business brought in last year. When you combine it with MRR (Monthly Recurring Revenue), you’ll be able to see your revenue trends and get a sense of how much cash is flowing into your company at any given moment.
17. MRR (Monthly Recurring Revenue)
MRR is an important metric for SaaS businesses because it represents cash coming in each month. It is simply a company’s total revenue divided by 12. Expressed as a ratio or percentage, it can also be calculated by dividing annual recurring revenue (ARR). MRR is often compared with the monthly churn rate – which measures how many customers have stopped using your product in a given month.
18. DAU (Daily Active Users)
To calculate DAU, divide your number of monthly active users by 30. For example, if you have 5 million monthly active users (MAUs), multiply that by 30 for a daily active user count of 150,000 people. If you have 10 MAUs, then it’s 50,000 DAUs per day. Remember: these numbers will shift as your product evolves; be sure to update them frequently!
19. MAU (Monthly Active Users)
MAU refers to how many unique users visit your website in a month. It’s a quick, easy way of measuring your engagement levels (i.e., do people use my product?), especially if you have a significant social media presence. To measure MAU, you’ll want to look at your website’s unique visitors over time and for each month—not all at once because that number will be pretty high!
20. CTA (Call To Action)
There are multiple call-to-action (CTA) buttons on your website, but not all work equally well. A recent study says, only 1 out of every 200 CTA buttons gets clicked. That’s a lot of lost traffic right there! Make sure that you design each CTA button to stand out clearly and invite users to click. If you aren’t already using A/B testing, now is an excellent time to start.
It is no doubt that power metrics are a valuable tool for any startup; however, not all startups use them. It’s a good idea to take advantage of power metrics. They’re an incredibly useful asset in driving your business forward. And if you know what they are, you can actually implement them yourself!
These programs work over a network like a cloud. You’re not buying them from a store or downloading them onto your computer. Instead, you pay for access on an ongoing basis for as long as you need it, whether for one month or several years.
Once you’re able to manage and analyze growth with these metrics, your startup is going to achieve the desired heights of success.