Lesson 3: Metrics That Matter - Understanding Your Company's Numbers
Understanding Why Numbers Matter
When investors look at your company, they care deeply about your numbers because these show how well your business is actually working. Think of metrics like your company's health report - they tell the real story of how you're doing.
The Key Numbers Every Company Needs to Know
Customer Growth Metrics
Think of these like measuring how many people are joining your party:
Monthly Customer Growth:
- How to calculate: Count new customers each month
- What's good: 15-20% monthly growth is strong for most companies
- Example: Starting January with 100 customers, reaching 120 in February shows 20% growth
Customer Retention:
- How to calculate: How many customers stay month after month
- What's good: 95%+ monthly retention for software companies
- Example: If you start with 100 customers and 95 are still using your product next month, that's 95% retention
Money Metrics
Revenue Growth:
- How to calculate: New money earned each month
- What's good: Depends on your stage, but 15%+ monthly growth is strong
- Example: If you made $10,000 in January and $12,000 in February, that's 20% growth
Burn Rate:
- How to calculate: How much money you spend each month
- Why it matters: Shows how long your money will last
- Example: If you have $300,000 in the bank and spend $50,000 monthly, you have 6 months of money left
Unit Economics
Cost to Get a Customer:
- How to calculate: Marketing and sales costs ÷ number of new customers
- Why it matters: Shows if you can afford to grow
- Example: If you spend $1,000 on ads and get 10 customers, that's $100 per customer
Value of a Customer:
- How to calculate: How much money you make from each customer
- Why it matters: Shows if your business model works
- Example: If customers pay you $200 per month and stay for 12 months, each customer is worth $2,400
Different Metrics for Different Businesses
For Software Companies
Most important numbers:
- Monthly Recurring Revenue (MRR)
- Customer Growth Rate
- Churn Rate (customers who leave)
- Cost to Acquire Customer (CAC)
- Lifetime Value (LTV)
For Marketplace Companies
Most important numbers:
- Gross Merchandise Value (GMV)
- Number of Active Buyers and Sellers
- Take Rate (your percentage)
- Transaction Growth
- Repeat Purchase Rate
For Consumer Apps
Most important numbers:
- Daily Active Users (DAU)
- Monthly Active Users (MAU)
- User Growth Rate
- Engagement Time
- Retention Rates
How to Track Your Numbers
Create a simple dashboard showing:
- Weekly growth numbers
- Monthly growth numbers
- Customer retention
- Money in and out
- Key ratios (like CAC and LTV)
Understanding What's Good Enough
For Series A companies:
- Software companies: $1M+ in annual revenue, growing 15%+ monthly
- Marketplaces: $1M+ in GMV, growing 20%+ monthly
- Consumer apps: 100,000+ monthly users, 20%+ keeping using it
Common Metrics Mistakes
1. Tracking Too Many Numbers
- Focus on 5-7 key metrics
- Make sure they tell your growth story
- Keep it simple enough to explain quickly
2. Not Tracking Consistently
- Check numbers the same way each week
- Use the same calculations
- Keep good records
3. Missing Important Patterns
- Look for trends over time
- Understand seasonal changes
- Notice when numbers change suddenly
Your Homework
1. Set Up Your Tracking
- List your 5 most important metrics
- Create a simple spreadsheet
- Start recording daily or weekly
2. Learn Your Numbers
- Memorize your key growth rates
- Understand what drives changes
- Practice explaining your metrics simply
3. Compare to Others
- Research similar companies
- Understand typical growth rates
- Know what investors expect