A metric is something that we can track and quantify to see how well our business is doing. Cost of acquisitions, proportion of mobile traffic and recurring revenue are only a few of the metrics new businesses need keep their eye on. These metrics can be the difference between a startup’s downfall and success, lets take a look at how startup metrics can benefit your company.
Cost of Acquisition
Obtaining a customer is easier said than done. It takes time and money to get potential customers interested in your company or product. The expense required to attain a customer, or sell your product is the Cost of Acquisition. When planning out your expenses in a new business you have to take into account what the maximum amount of money you want to spend on each individual customer. The money you a lot to acquiring new customers can be put into advertising, sales campaigns, and other marketing strategies.
Consumer Lifetime Value
Customers are what give a business value. The business that a company can derive from a relationship with a consumer over a 12 or 24-month period is the Consumer Lifetime Value. The Pareto Principle says that in most businesses 80% of the revenue is from 20% of company’s consumers. This ties the CLV to the cost of acquisition. By spending more on getting customers you can retain more quality customers who will provide more revenue.
Monthly/Annual Recurring Revenue
Quality CLV customers contribute greatly to a company's Monthly or Annual Recurring Revenue. This is a percentage of the revenue that is likely to recur in the future, a predictable and stable source of income. For your blossoming business you want this percentage to keep growing, a strong recurring revenue building a foundation for a strong business.
Acquiring and retaining customers is crucial to a businesses success. Customers do stop buying products or loose interest though, that is where the Churn Rate comes into play. The Churn Rate is the percent derived by dividing the number of customers lost by the total number of customers. The Churn Rate directly affects the profit your company is able to make.
Making sure your company is self-sustaining is a vital part in ensuring its success. Sustainability includes making sure the amount of coming in is at least as much as the money flowing out. The negative cash flow is called the Burn Rate. The Burn Rate is typically measured in months (sometimes days or weeks if it is endangering the company), and it comes from the operating costs that the company has like paying employees and other business expenses. Burn Rate is crucial to understand and maintain in a new company if you want to make money from your operations.
Total Addressable Market
When you make a new product for your company you make something that you know people will want to buy. You make sure that there is a profitable consumer market out there; this market is called the Total Addressable Market for your product. The amount of money you can draw from this market is the potential that your company has to make money. Make sure that your product fits into a market that had a lot of opportunity, something that is still growing and has room to do expand.
Proportion of Mobile Traffic
A startup wants to make sure that their web pages are getting as many views as possible. As online trafficking is transitioning to mobile media more companies are transitioning from desktop to mobile. The Proportion of Mobile Traffic is an important metric in today's marketing strategy. It is defined by a percentage, the number of mobile site visits divided by the total number of visits. If this percentage is high or over 100 it would be a good idea to consider revamping your mobile site, create more mobile directed media, and even making an app to make your products even more accessible from a mobile device.