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Tell me your 3 main KPIs

Startups face several key metrics that must be constantly optimized for their success--namely lifetime value (LTV), customer acquisition cost (CAC), and growth rate.

Although they vary by industry, each indicates a different area of good financial health.

  • LTV measures the total value that a customer brings to a business over their lifetime

  • CAC is a calculation of how much it costs to acquire each new customer

  • Growth rate indicates the size and rate of the company’s growth over a period of time.

By regularly tracking, analyzing and optimizing these metrics, startups can identify where to double down on their investments and ensure they’re efficiently scaling their business.

What about you?

  1. 5

    I once read coca-cola had a LTV of well over $20,000 per customer. Of course LTV really starts to kick in after a meaningful amount of time has passed.

    1. 1

      Absolutely! Thanks for sharing that!

  2. 2

    Sustained growth and well-informed decision-making depend on regular optimisation and monitoring.

    1. 1

      100% We can't improve if it isn't measured. Thanks for sharing!

  3. 2

    I approach KPIs from first principles:

    Weekly revenue growth is the single most important metric for any startup:

    Weekly growth = Customer acquisition - customer churn
    Customer acquisition = Traffic x conversion rate
    Customer churn is a result of poor retention (product)

    Therefore - to increase growth - my 3 KPIs are:

    Retention
    Conversion rate
    Traffic

    1. 1

      Great! I can say I absolutely agree with you. Also weekly measuring here, but time range can change from company to company. Thanks for sharing

  4. 2

    Love your question German and enjoyed reading through the comments. I'd add customer value metrics...these are specific to the type of problem your company is solving. If you can track this in a systematic way and proactively play it back to your customers, retention should theoretically remain stable. Example for Slack: 200 emails and 30 meetings avoided last month.

    1. 1

      Glad to add some helpful insight. I aim just put it on the table in order to discuss and to share thoughts. Retention is key. Thanks for answering.

  5. 2

    Hey German - i have a B2B Martech SAAS in the online reputation management space and here are the top 3 metrics we track:

    CAC - We started off by acquiring our initial 10 customers by connecting with agencies and paying them a referral/affiliate fee. Tracking CAC was crucial for us to understand when to pivot from this pricey model to other acquisition models.

    MRR - Helpful with budgeting and forecasting the available funds. This in turn helps us with determining whether if we need to modify our customer acquisition strategy.

    Churn Rate - Helps with reporting on the real pulse of the business and the features we are building.

    1. 2

      Thanks smalik! Of course Churn rate is super useful. I tend to see Growth rate (that actually involves churn) but it's a matter of taste. Both are crucial!

  6. 2

    Hi Germán and Indie Hackers community,

    I'm Kevin, Director at Plazn . Fascinating discussion on KPIs!

    At Plazn, our key internal KPIs are tailored to our position in the restaurant management space:

    Customer Retention Rate (CRR): We prioritize how effectively we retain our restaurant partners. High CRR indicates our platform's value in helping restaurants manage reservations and insights efficiently.

    Average Revenue Per User (ARPU): This metric is vital for us. It measures the average revenue generated from each restaurant using our platform, reflecting both our pricing strategy's effectiveness and the value we provide to our users.

    Operational Efficiency Ratio: Given that we provide data-driven solutions, it's crucial for us to measure how efficiently we operate.

    Best!

    1. 1

      Customer Retention is a good one! It seems like 'churn rate' but It sounds better! Thanks for sharing!

  7. 2

    Great article Germerlo! It's amazing how much insight you offer into the vital importance of understanding and optimizing KPIs. You offer incredibly helpful tips for startups looking to be successful. Well done!

  8. 2

    Absolutely, the metrics you've highlighted—Lifetime Value (LTV), Customer Acquisition Cost (CAC), and Growth Rate—are indeed critical for startups to monitor and optimize for sustainable growth and financial health.

    Lifetime Value (LTV): This metric represents the total value a customer brings to a business throughout their relationship with that business. It includes the revenue generated from the customer, considering their purchases, subscriptions, or any other contributions over the entire time they remain a customer. High LTV indicates that the business is successful in retaining customers and generating revenue from them over an extended period.

    Customer Acquisition Cost (CAC): This metric calculates the cost incurred by a company in acquiring each new customer. It involves the expenses associated with marketing, sales, advertising, etc., divided by the number of customers acquired in a specific period. Lowering CAC is crucial as it ensures efficient spending on customer acquisition, improving profitability in the long run.

    Growth Rate: Growth rate measures the rate at which a company is expanding its customer base, revenue, or market share over a certain period. It is a crucial indicator of a startup's success and potential. Sustainable growth, especially at an increasing rate, is vital for attracting investors, scaling operations, and staying competitive in the market.

    Regularly tracking, analyzing, and optimizing these metrics is essential for startups to understand the health of their business and make informed decisions. It helps in identifying areas that need improvement, optimizing strategies, and allocating resources efficiently. For instance, if the CAC is too high compared to the LTV, it might signal the need to refine marketing strategies or focus on customer retention to increase the overall profitability.

    By utilizing these metrics effectively, startups can refine their business models, enhance customer experiences, and ensure that their growth trajectory remains steady and sustainable.

    1. 1

      Absolutely! Health of their business. Thanks for answering

  9. 2

    For MedGPT, it is the searches people do on the app.

    1. 1

      Nice! Custom metrics are also key

  10. 2

    In our case, measuring recurrent revenue is crucial. We need consistency at the end.

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