in Informative

[Infographic]: Understanding the Startup metrics

It takes a lot of calculations and efforts for a person to “start-up”. Both the calculations and the efforts are required to continue even after the start-up has started. At the beginning you calculated the finances, now you need to calculate the performance of your Start-up.

For calculating the performance of your Start-up, you would need some Metrics. Metrics refers to the measure you would use to track your Start-up’s performance.  There are many start-up metrics that can be used to measure your start-up’s performance, let’s take a look at some of them.

Below is the infographics by founders and funders on different types of startup metrics that every Entrepreneur should know.

[Infographics] - Different types of metrics to measure for Startups

 

Monthly Recurring Revenue (MRR)
  • MRR is a monthly income that is recurring in nature and can be predicted very easily.
  • This is an income that you are certain to earn in a month.
  • It excludes all one-time payments and fees and includes only those payments which reoccur every month.
  • MRR can be easily calculated by summing up all the monthly recurring payments received from every individual customer.
Average Revenue per Account(ARPA)
  • The amount of income you earn from a customer on an average is known as APRA.
  • It is also called Average Revenue per User/ Customer/Unit.
  • It can be calculated monthly as well as annually by dividing either MRR or ARR by total number of customers.
Total Contract Value (TCV)
  • Total Contract value is a metric that measures the total income you can earn from all your customers or contracts including both one-time and recurring payments.
  • TCV is the sum of the one-time payments made by all the customers and the recurring payments obtained every week/month/ year from every customer.
  •  It can be calculated on weekly, monthly, quarterly or annual basis.
Lifetime Value (LTV)
  • LTV is a futuristic metric and it measures the revenue that you can collect from a particular customer through all his/her purchases with you.
  • LTV can be estimated on the basis of historical data.
  • It can also be estimated using predictive techniques.
Deferred Revenue
  • Deferred Revenue is the unearned income that you have received before the actual delivery of the product/service.
  • It is considered as a liability for a company until the product or service is actually delivered to the customer.
  • Deferred Revenue is a metric to measure how much do you owe to your customers.
Customer Concentration Risk
  • Customer Concentration Risk is a scenario when more than 8% of your annual revenue comes from a single or a few of your top customers.
  • Generally, a higher purchase from customers is a good thing. But when a large chunk of your revenue comes from a single or a few of your big customers, you are at a risk of losing your bargaining power.
  • To avoid this risk, it is essential to calculate customer concentration.
  • It can be calculated by dividing revenue from the largest customer by total revenue of a year.
Activation Rate
  • If you have an e-commerce start-up, this metric is the most useful to you.
  • Activation rate is the number of customers who have actually derived value from your products/services after subscribing or signing-in.
Monthly Churn Rate
  • It is the number of customers that discontinued their subscriptions or stopped deriving value from your products/services within a month.
  • Monthly churn rate is equal to (the number of customers at the beginning of the month – the number of customers at the end of the month)/ the number of customers at the beginning of the month.
Retention by Cohort
  • In the context of customers, cohort is generally the date of first purchase. All the customers who made their first purchase on the same date will be grouped into one cohort.
  • Retention by cohort can be calculated by subtracting the number of customers, acquired on a certain date, that are still transacting with you from the total number of customers acquired on that particular date.
Net Burn
  • It is the rate at which a start-up is using its venture capital to finance its operating expenses.
  • Net burn can be calculated by subtracting gross burn from total revenues received in a month.
  • Gross Burn refers to the total amount of operating and overhead expenses incurred by a company in a month.
 Annual Run Rate
  • Annual run rate is an estimate of recurring revenue that you can earn in a coming year.
  • It is calculated by multiplying the current monthly recurring revenue by 12, assuming that the MRR remains constant for each month.
Sell-through Rate
  • It measures the number of products that were sold during a given period which can be month or a year.
  • It is calculated by dividing the no of items sold in a month/year by the inventory received in the beginning of the month/year.

Network Effect

  • Value of product/service increases as the network grows i.e. no of users increases.
  • Ex – Mobile, telephone, social media where we can say if the network of n people, then total no of possible connections are – nC2
  • So, as n increases the value increases.

Virality

  • Virality is the tendency of an electronic content to spread quickly from one internet user to millions of others.
  • Virality as a metric that measures the efficiency of the viral content in creating conversions.

Net Promoter Score (NPS)

  • Net Promoter Score determines how likely your existing customer is to recommend your product/services to someone.
  • A high NPS means that your customer relationship management is effective and is contributing directly to your revenue growth.

Direct Traffic

  • Direct traffic refers to the number of visits on your website that came directly without any intermediary.
  • It is the traffic that was either generated by directly typing your website URL or by clicking on a bookmark or through the referrer which could not be recorded by the Analytics.

Organic Traffic

  • Organic traffic is the visits that your website receives through unpaid search results also called organic search results.
  • Organic search results are the search results that came up on a search engine because of their relevance to the search keyword.
  • Organic traffic comprises of the visitors who came to your website through search engine results as opposed to direct traffic that comes through directly typing your URL.

References:

http://fundersandfounders.com/startup-metrics-infographic
https://www.zuora.com
http://www.saasmetrics.co
www.investopedia.com
http://www.customerlifetimevalue.co
http://exitpromise.com/calculate-customer-concentration-risk
http://effinamazing.com/blog/everything-need-know-activation-metrics/
https://pipetop.com/saas-glossary/metrics/arr-annual-run-rate/
http://www.evergage.com/blog/how-calculate-customer-churn-and-revenue-churn/
http://www.evergage.com/blog/what-cohort-reporting/
https://megalytic.com/blog/understanding-direct-traffic-in-google-analytics

Comments

comments