The best thing about working at a young startup is that we really work on a lot of things. Kudos to my team mates – Jason, Teena and Steven for the great mentorship.
More recently I have been reading a lot on how startups track their growth and measure their success. I thought of sharing the same with everyone.
Think the business as your own and try to find the critical business questions that will help us grow and succeed. – Jason Van, Hoolah
Why we need Metrics?
It’s hard to improve, what we don’t measure.
While revenue might be the best measurement of success, it is very broad and doesn’t highlight the details of what causes growth. Metrics are data driven and helps the startup to set measurable goals.
Most Important Metrics to track
Here is a list of most important metrics that we should track for our success.
Active Users
We might have already heard of the terms Daily Active Users (DAU) and Monthly Active Users (MAU). This metric was popularised by Facebook. They used DAU / MAU ratio for measuring their growth.
One point to note however, MAU doesn’t always make sense for lot of young startups because of the longer duration. Many companies have proposed DAU / WAU (Weekly Active Users) to measure the growth of young startups.
I will be using WAU in my examples below, but feel free to replace it with MAU if that makes more sense for your business.
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Further reading :
Classification of Active Users
Active users shouldn’t just be a count but we should also capture if the active user is a new customer or an existing customer. This will help us compare and understand the behaviour between the two types of customers.
Few companies also capture the customers who did not visit us again. They are called Dormant Users.
Another interesting type of Active user is Reactivated users. This is a user who went dormant for a while and became active again.
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Customer Churn Rate
This is the percentage of users that stopped using our services. Customer churn affects our growth and is an important metrics that we should have our eyes on.
Customer churn can be calculated as :
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Further reading :
Customer Retention Rate
This is the opposite of customer churn. This shows us the number of customer that we retained over a give time period. Customer retention is a positive metrics and affects our revenue.
It can be calculated as :
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Further reading :
Customer Acquisition Cost
This is an important metric to calculate the cost to acquire a new user. It’s slightly more completed than other metrics since it requires two datasets. It involves using the active user data along with the financial data to compute the cost of acquisition of a single user.
The simplest way to calculate this is to calculate the total expenses in the given time window and divide that with total new users acquired in the same time window. Note that we should only consider new users and not existing users.
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Further reading :
Finishing notes
Thats all for this post, it has been a great learning so far. Hope the post was useful. Cheers.