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Startup

A startup is a venture by entrepreneurs with an idea to solve a problem with a significant business opportunity. Startups should track key metrics to scale up their operations. 5 Key Metrics and KPIs Startup must track 

Key Metrics of a Startup

It is important to keep track of the following key metrics:

• Sales Revenue: Startup must measure Sales Revenue also called Topline is a generic term. This is a starting point for any financial analysis. This shows income received from Customer who buys your product or signs up for services. Keep an eye on why the sales revenue is increasing or decreasing.

While measuring sales revenue, understanding the impact of price, seasonality, and marketing intervention.

Sales revenue is measured by No of units sold x Price per unit. Also for services, No of hours to be billed x rate per hour.

• Revenue Run Rate: This helps to understand how your business is scaling. This is helpful at the time of building forecasts and picking up trends or a particular pattern.

Revenue Run Rate is calculated by Last month revenue x 12 = Yearly Revenue run rate.

• (CAC): This is the cost of acquiring a new customer. This helps to understand the value of marketing strategies. Further, customer acquisition costs would go down as your business grows and people recognizing your brand.

Customer Acquisition Cost (CAC) is calculated by Total Acquisition Cost divided by the number of new customers acquired.

• Burn Rate: Burn rate indicates how much cash loss is incurred to run the operations. This means the cost of operation is higher than Sales Revenue and the deficit being incurred to run the operation. The investor must know your burn rate and how many months your operation can run with existing cash or bank resources.

• Profit & Loss Account (P&L): A profit & Loss account is drawn to know whether the business is incurred loss or generating profit.

Profit / Loss = Sales Revenue less Cost (both fixed cost and variable cost)

Fixed Cost is the fixed amount of expenditure incurred irrespective of the number of units sold eg Marketing Cost or advertisement cost is incurred irrespective of the number of units sold. Variable Cost depends on the number of units sold or produced. Eg sales commission varies with the number of units sold, the cost of raw material depends on the number of units produced. 5 Key Metrics and KPIs Startup / Small Business must track.

Startup must track Key Metrics against budget for this key KPIs.

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