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How do you decide your company is growing? Do you account your growth in terms of users acquired or the total revenue generated? Or is it on the basis of straightforward metrics like pageviews and app downloads? In order to measure the health of your startup, it is essential to keep an eye on a few important metrics. Key metrics are the numbers which help us understand the state of the business, to track if the business is moving in the right direction or not.

But how does a business identify such metrics? Without wasting times with needless email or excel sheets, you should focus on getting your business to the next level, chasing funding and hiring the right talent to get the desired outcome. Without strategic planning or business metrics, you are like a missile full of power but with no guidance on the target. Once, we are setting them, you will be able to grow your business exponentially and can tease out potential problems with your planned strategy.

Customer Retention

DAU’s (Daily average users/buyers); MAU’s (Monthly average users/buyers) and cohort retention numbers are important. The number of registrations, number of app downloads are illusory and don’t convey or build any value in the long term. These lead to profitable revenue growth and hence showcase the overall health of the business.

Conversion Rate

Conversion rate which measures the number of people who do an intended action (such as register/download/buy) against the total number of people who visit/download, open app, etc. This is a great metric since it encompasses all necessary features for a good business- a great website/app; good quality traffic, effective advertising and good UI since if all these are not there, conversion rates will be low.

Growth Rate

If it’s a transaction business this is measured as revenue, if it’s an engagement business this could be in terms of DAU’s/MAU’s. Here the ratio of new customers to existing customers is paramount because the rate of acquisition of new customers results in revenue eventually.

Gross Margins 

Startups should know what kind of gross margin is typical for their industry so they have a sense of where they stack up. Gross margins can help companies to identify how effective the management, sales, and customer teams are at driving the business, what stage of the curve your business is in, what operating levers they can use to drive growth, and how close are they to inflection points.

Revenue Run Rate

As a business starts to grow (develop a working product, gain customers and execute a plan), startups need to start measuring how their business is scaling. Revenue run rate measures how sales are developing over time. It can help a business identify how likely they are to hit their forecasts, capture directional trends, and tease its potential problems with the pricing strategy.

By: Damilola Faustino

See Also: Tips for Bootstrapping A Startup with No Funding

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