Metrics to Grow Your Business
- Pitch Coach, Startups

Metrics to Grow Your Business

Once you go to the market, it becomes a numbers game.  If I can deliver $3 of value for every $1 spent, I will be successful.

These are a few metrics to consider

  • Customer Acquisition Cost – CAC – What does it cost you to acquire a customer. All the ads, marketing costs, free versions, and overhead.
  • Average Spend – what is the average ticket spend.
  • Lifetime Value – LTV – Over the product’s life, the margin or profitability per customer.
  • Churn – For every customer that goes at the top of the funnel, how many customers leave. If every month 10% of your customers leave, you need to replace your entire customer base every ten months. So a good churn is below 5%.
  • Break Even – (Sales – COGS) divided by overhead. How long until you reach profitability?
  • Burn rate – How much you are losing every month (negative cash flow). You need enough working capital to reach breakeven.
  • Payback period – This is a risk assessment. A product with a shorter payback period is less risky.
  • Net Present Value – Taking into consideration the time value of money. For example, $1 Million is worth more today than receiving the same amount 5 years from now. We discount some Future Value by a discount rate to determine what it would be worth today. We often use NPV to decide between competing projects.
  • Return on Investment – ROI – (Revenue – costs)/costs = %. For example (30,000-20,000)/20,000 = 50% ROI. The problem with ROI is it does not consider the time value of money.
  • Internal Rate of return – IRR – IRR is the same calculation as NPV, where NPV is 0. The IRR indicates the annualized return rate for a given investment-no matter how far into the future and a given expected future cash flow. ROI indicates total growth, start to finish, and investment, while IRR identifies the annual growth rate.
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Understanding these metrics will help you make productive decisions when growing your business.

Metrics to Grow Your Business

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