Your startup journey begins with understanding the metrics that drive your business forward. Active users, revenue per user, churn rates, and acquisition costs are not just numbers on a spreadsheet; they’re the pulse of your startup, the heartbeat of your success.
In this concise yet comprehensive guide, we’ll unravel the complexities of key financial terms and metrics that every startup founder should have in their arsenal. From understanding the heartbeat of your user base to deciphering the intricate dance of revenue and costs, we’ve got you covered.
What is…
Active Users (MAU, WAU, DAU, HAU)
Active users are the lifeblood of your startup. Whether they’re logging in daily or engaging with your platform hourly, understanding their activity is crucial. Define “active” clearly, consistently measure it, and watch for trends.
- MAU – Monthly Active Users
- WAU – Weekly Active Users
- DAU – Daily Active Users
- HAU – Hourly Active Users
Average Revenue Per User (ARPU)
Unlock the true value of your users with ARPU. It’s not just about subscriptions or ad clicks; it’s about demonstrating the worth of each user. Investors love comparing your ARPU against industry benchmarks to gauge potential.
Bookings
Not all revenue is created equal. Bookings reflect contracted value, not just cash in hand. Avoid the common pitfall of conflating bookings with revenue.
Burn Rate
Money talks, and your burn rate speaks volumes. Know how fast you’re spending cash, and whether it’s net or gross burn, to ensure you’re not running out of fuel too soon.
Cashflow
Cash is king, and cashflow is its lifeline. Positive cashflow means you’re thriving; negative, and you’re in trouble. Monitor it closely to stay afloat.
Churn
Don’t let churn eat away at your success. Understand different churn metrics and focus on retaining your valuable customers.
Customer Acquisition Cost (CAC)
Acquiring users isn’t cheap. Calculate your CAC accurately to determine if your marketing efforts are paying off.
Customer Lifetime Value (LTV)
Loyal customers are golden. Calculate their lifetime value accurately to understand the long-term impact on your bottom line.
Cohort Analysis
Track user behavior over time to uncover insights that drive growth. Investors love to see cohorts that stick around and improve over time.
Fixed Costs versus Variable Costs
Know your costs inside out. Fixed costs are predictable; variable costs, are less so. Understanding both is key to financial stability.
Gross Margin
Keep an eye on your bottom line with gross margin. It’s the percentage of revenue you keep after production costs.
Gross Profit
Top-line growth is great, but what about profit? Gross profit tells the real story.
Month-over-Month Growth (MoM Growth)
Track your growth month by month to stay on top of your trajectory.
Net Promoter Score (NPS)
Happy customers mean business success. Measure satisfaction with NPS to ensure you’re hitting the mark.
Network Effects
Build a product that gets better with every user. Network effects create a powerful moat against the competition.
Revenue (ARR, MRR)
Revenue is the lifeblood of your business. Understand recurring revenue and its implications for your future.
- ARR – Annually Recurring Revenue
- MRR – Monthly Recurring Revenue
Registered Users
More than just numbers, registered users represent your potential audience. Focus on turning them into active users.
Retention Rate
Retaining customers is cheaper than acquiring new ones. Monitor your retention rate to ensure you’re keeping your audience engaged.
Run Rate (ARR)
Get a glimpse into your future revenue with ARR. It’s the annualized version of your recurring revenue.
Total Addressable Market (TAM)
Understand the size of your market opportunity with TAM. Take a bottom-up approach for a more accurate picture.
Unit Economics
Know the ins and outs of your business model with unit economics. If LTV (lifetime value) exceeds CAC (customer acquisition cost), you’re on the right track.
Viral Coefficient
Go viral or go home. Measure the spread of your product to unleash its full potential.
Armed with these insights, you’re ready to chart a course to startup success. Keep measuring, keep iterating, and keep pushing forward!
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