THE RIGHT SCALES FOR SCALING UP

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The must-assess metrics that every founder should proactively monitor

Picture this, you are sitting on an island and all of a sudden you have an epiphany. A brilliant idea sparks into your mind and mustering all the courage that you possess within; you decide to give this idea a shot. You gather around a few twigs, tie them with a rope and make a shabby raft. With little time to waste, you set sail into the wild sea, with tumultuous waves giving you a death scare. Will your ship be able to sail properly? Will you ever get to see land again? Will you be able to see the next sunrise?

You shove all of your fear aside and focus on maintaining the trajectory of your set course. You ‘magically’ keep on adding every resource that you can find on the sea and add them into your raft. Twigs, bottles, seaweed – any resource that you can accumulate from the massive, blue body of water. A group of diligent sailors ‘miraculously’ join you and work together to help you reach the destination. Some wither away in course of time, some remain with you through thick and thin. And after a long, tiring expedition, with all the hard work and a stroke of luck, you finally reach the shore. What started as a mere raft has now transformed into a full-scale cruise liner over time – backed by your resourcefulness, dedication and the tireless work of your teammates. No, this is not a plot from the next Pirates of the Caribbean movie; but rather a depiction of how creating a startup from scratch sounds like.

It’s obviously not easy to build a startup. Especially when the business model has not been proved, the technology side is yet to mature and you’re there with your co-founders – trying to get more capital to ensure that the idea thrives. Amidst all the bustle, there are certain metrics that should be your guiding star. These metrics should wither away all your uncertainties and help you take the proper business decisions. Let’s look into the key metrics that you must keep in check in so that your startup grows properly –

Startup Growth metrics

It can be seen that oftentimes many startups focus on growth instead of profits. Hence, they often need to track KPIs that may be different from those used by established businesses.
Daily active users to monthly active users ratio: This metrics reflects how often users engage with your product/service, i.e., its stickiness.

BURN RATE: This indicates how rapidly a company is using up its money. In order to have a strong grip on your holistic company expenses and identifying the core areas where the company is inefficiently or efficiently utilizing its available funds, this metric is a must-use!

ACTIVATION RATE: This tells you the number of visitors or users who are engaging with your app or website. Depending on the nature of your business, it could be the number of clicks, time on the website, pages viewed, downloads, email/blog subscription, or trial signup. Activation rate not only enables you to have a proper idea about your audience, but also allows you plan the next move for your audience (e.g. signing up newsletters, subscribing etc. )

CUSTOMER CHURN RATE: This shows the percentage of customers lost in a given period (e.g., canceling their subscriptions or not making a repeat purchase). Your growth team can use this metric to not only regain your audience but also get an idea of your potential competitor or to identify any bottleneck that is obstructing your customer flow.

REVENUE GROWTH RATE: This metric measures the month-over-month percentage increase in revenue and is the most common and important metric for startups. For a fledgling company, nothing is more assuring than revenue – for both the founding teams as well as the investors. Hence, this metric should be measured with significant importance.

Marketing metrics

While building a good product or service is necessary, it is also equally important to let your prospective customer know about it. This is where the Marketing metrics come in.

COST PER CONVERSION OR ACQUISITION: This metric represents the total cost paid for an advertisement in relation to its effectiveness in generating a conversion. This enables you to keep an eye on the expense aspect as well.

CONVERSION FUNNEL: This metric indicates how prospects advance through the marketing funnel in a specific duration. Thus, you can get a better idea not only about your customers, but also how frequently they interact with your product or service.

ROI: One of the most significant marketing metrics of them all, ROI measures the effectiveness of your marketing initiatives by comparing conversion values to costs.

Sales metrics

As marketing acquires the mind share of your prospective customer; it is sales that do the hard work – getting into the customers’ pockets.

SALES GROWTH: This metric should be a fundamental part of your business strategy as it helps you set realistic revenue projection and objectives. You can track it in multiple segments – from weekly sales growth to even monthly and quarterly growth to periodically assess the sales performance of your company.

SALES CONVERSION RATE: The Sales conversion rate metric shows you how well your sales team is in converting prospects into new customers. Not only does this enable you to have a proper grip on your sales number, but also allows you to understand the performance of your sales team; in terms of the deals that they are closing.

OPEN OPPORTUNITIES BY STAGE: This gives you a proper visibility of the leads that you have at each stage of the sales cycle and how you can best allocate resources to pursue them, and turn them into paying customers in the end.

CUSTOMER ACQUISITION COST (CAC): This measures the monetary and non-monetary resource it takes to acquire a customer (e.g., over the last 30 days)—you’re profitable if the revenue from each customer is higher than that of the CAC.

SaaS metrics

With the advent of technology, we have seen the rise of SaaS (Software as a service companies) all across the globe, like Salesforce, Dropbox, Hubspot etc. Hence, there are certain metrics that must be considered to keep the performance of SaaS companies in check –

CUSTOMER LIFETIME VALUE (LTV): This metric measures the value that a customer generates throughout his journey with your company. The longer a customer stays with your business, the higher the LTV and the more profitable the relationship is.

MONTHLY RECURRING REVENUE (MRR): This metric indicates how successful your business is at growing its customer base and retaining customers.

NET PROMOTER SCORE (NPS): NPS measures customer loyalty and satisfaction, which is essential for customer retention and referral marketing. This not only enables you to track your own customer base, but can also enable you to create action plans that will result in having more loyal customers in the long run.

CUSTOMER LIFETIME VALUE TO CUSTOMER ACQUISITION COST RATIO (CLV: CAC): This is an important metric that indicates the profitability of the subscription model, it measures the relationship between the lifetime value of a customer and the cost of acquiring that customer.

Employee Satisfaction metrics

At the core of your company lies the people who are right beside you in turning your very dreams into reality. While conversion and customer retention KPIs are crucial to your business success, employee engagement can’t be taken lightly either. This is because employee satisfaction, engagement, and motivation are all tied to productivity and retention.

EMPLOYEE ENGAGEMENT: This measures the output compared to cost for each employee. This is also tied to higher customer ratings and less turnover.

SUPERVISOR SATISFACTION: This metric shows how satisfied employees are with their boss. According to a leading research, 1 out of 2 professionals reported leaving a job because of a bad boss.

INTERNAL NET PROMOTER SCORE: This metric measures how loyal and satisfied employees are with their work environment. One way to measure this is by internal surveys asking questions like, “How likely is it that you would recommend working at our company to a friend or colleague?”

GOAL PERFORMANCE: Goal performance sets specific performance goals for each employee role and measures the percentage of achievement. If employees are achieving close to 100 percent of the goals then your bar is set too low. A good goal performance percentage for employees to strive for is 60 to 80 percent.

Customer Experience metrics

Attracting and securing a new customer for your business will always prove to be costly. It’s 5x more expensive to acquire a new customer than to retain an existing one. Couple that with the fact that businesses can increase profits by 25 to 95 percent by increasing customer retention by 5 percent. Monitoring and improving customer support KPIs is one of the most effective ways to grow a business.

CUSTOMER SATISFACTION SCORE (CSAT): This metric is a measure of your customers’ emotional satisfaction with your product, service or overall business. These scores can come in the form of numbers (1-10), stars, etc.

NET PROMOTER SCORE (NPS): NPS measures from 1-10 how likely your customers are to recommend your business to a friend. Their responses put them into three buckets: “promoters (9-10), passives (7-8), or detractors (0-6). Take the percentage of “promoters” minus the percentage of “detractors” and you get your NPS.

FIRST RESPONSE TIME: This takes into account how rapidly your support team responds to customer questions or complaints. Speed is a top determining factor of customer satisfaction, even if the answer didn’t solve the issue. Not only is this a good metric to enable a superior customer experience, but this can also identify operational bottlenecks that can be eradicated to ensure a seamless experience.

CUSTOMER RETENTION RATE: This measures the percentage of customers that have stayed with your business over a specified period of time (annually, monthly, etc.). Increasing your customer retention rate can lead you to have a better and more loyal customer pool.

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