I've advised over 75 startups on growth.
The best companies track the right metrics.
Here's 9 metrics every Founder and Marketer should know:
The % of visitors who take a key action on your site.
A conversion is usually a sign-up or purchase.
Conversion Rate = Number of conversions / Number of visitors
• Test different headlines, value propositions and CTAs
You had 1,000 visits to your site last month.
You got 50 people to sign up for your newsletter.
Your sign-up conversion rate is 5%
The percentage of new users who do a core action in your product.
Activation Rate = Number of new users who became active / Number of new users
• Get new users to the product value fast
• Have a strong welcome series
You are a fitness app.
A user becomes "active" when they do a training session.
Last month, 50 new users do a training session.
500 new users who signed up.
Your Activation Rate is = 10%
The total number of users who were "active" in a given timeframe.
This includes new and existing users.
Usually, this is:
• Daily Active Users (DAUs)
• Monthly Active Users (MAUs)
• Add sticky features
• Send re-engagement emails
You have 10,000 users in your fitness app.
1,000 did a training session in the last 30 days.
You have 1,000 monthly active users.
The number of customers who stop using your product.
Churn = Number of customers who stopped using the product / Number of customers at the start of the period.
• Improve your onboarding flow
• Offer annual pricing
You have 5 customers cancel this month for your SaaS
You started the month with 50 customers.
Your Churn is 10%
The amount of revenue per user.
ARPU = Amount of revenue / number of users you have
• Offer upsells / cross-sells
• Create new products
• Sell bundles
You made $10,000 in total from your app.
You have 100 users.
Your Average Revenue Per User is $100
Marketing and sales costs to acquire a customer.
CAC = Total marketing costs / number of new customers
Get this as low as possible.
• Make your marketing more effective
• Improve your conversion rates
You spend $20,000 on marketing next month.
You get 100 new customers.
Your CAC is $200.
The total value a customer generates over the lifetime of using your product.
LTV = Average Monthly Revenue Per User x Average Customer Lifetime
• Reduce churn
• Offer upsells + new products
Your SaaS costs $10 a month.
The average lifetime of a user is 12 months.
Your Lifetime Value is $120
In SaaS people often speak of the LTV: CAC ratio.
This shows the efficiency of marketing.
The next metric is better for this:
The time it takes to recoup the cost of acquisition from a new customer.
Payback Period = Customer Acquisition Cost / Product Cost * Profit Margins
• Offer annual or lifetime pricing
Let's say you spent $200 to get a customer.
Your product costs $50 / mo.
Your profit margins are 80%:
$200 / ($50 * 80%)
Your Payback Period is 5 months.
This is the amount of revenue you get on a recurring basis from your customers.
This is calculated as:
• Monthly (MRR)
• Annually (ARR)
MRR = # of customers * average billed amount
ARR = MRR * 12
• Upsells + cross sells
You have 20 customers.
They pay on average $50.
Your Monthly Recurring Revenue is $1,000.
Your Annual Recurring Revenue is $12,000.
I created a free Notion dashboard for you to track all of these key metrics.
You can get it here:
TL;DR 9 metrics every founder and marketer must know 📊:
1) Website Conversion Rate
2) Activation Rate
3) Active Users
5) Average Revenue Per User (ARPU)
6) Customer Acquisition Cost (CAC)
7) Lifetime Value (LTV)
8) Payback Period
9) Recurring Revenue