5 Essential Financial Metrics Every Startup Should Track
Learn about the key financial metrics that can make or break your startup's success. From burn rate to customer acquisition cost, these numbers tell the real story of your business.
Introduction
As a startup founder, understanding your financial metrics is crucial for making informed decisions and attracting investors. In this post, we'll explore the five most important financial metrics that every startup should track.
1. Burn Rate
Your burn rate is the amount of money your company spends each month. This metric helps you understand how long your current funding will last and when you'll need to raise more capital.
2. Customer Acquisition Cost (CAC)
CAC measures how much it costs to acquire a new customer. This metric is essential for understanding the efficiency of your marketing and sales efforts.
3. Lifetime Value (LTV)
LTV represents the total revenue you expect to generate from a customer over their entire relationship with your company. A healthy LTV to CAC ratio is typically 3:1 or higher.
4. Monthly Recurring Revenue (MRR)
For subscription-based businesses, MRR is the total predictable revenue generated each month. This metric is crucial for understanding your business's growth trajectory.
5. Gross Margin
Gross margin shows the percentage of revenue that remains after accounting for the direct costs of producing your product or service. A healthy gross margin indicates a sustainable business model.
Conclusion
Tracking these five financial metrics will give you a clear picture of your startup's financial health and help you make data-driven decisions for growth.