As you start up your startup, you’re going to be obsessed with several things: getting investors, ascertaining future growth potential, checking and rechecking your projected business income and outgo. But the things upon which you should focus zealously are your company’s key performance indicators (KPI). You won’t be able to grow your startup with a singular focus on these important business indicators.
This is especially the case before you stand in front of potential investors to give your startup pitch. In fact, while the numbers themselves are important, it’s actually critical that you understand what they mean and indicate about your startup’s future: potential investors are going to grill you on these, so be prepared!
Take a look below for some KPIs we think you should understand like the proverbial back of your hand.
What’s your customer acquisition cost (CAC)?
This is the total amount you spend on advertising, marketing and other costs to acquire one customer and your startup will run out of money quickly if it costs you more to acquire customers than the income you receive from them.
Your CAC also should be looked at in relation to your customer retention rate (a percentage of customers who continue to purchase from you over a period of time). Acquiring new customers is much more expensive than selling to old ones, and a good retention rate shows investors that you’re keeping your customers satisfied
What’s the lifetime value (LTV)
How long do you believe it will take a customer to purchase from you? Knowing this figure, particularly as it relates to your CAC, will help you build a company that lasts.
In fact, what’s the ratio of CAC to LTV? Many experts look at this as the best indication of company sustainability because if your startup can repeatedly and regularly turn $X into $10X or $100X, etc., then your firm is considered to be sustainable.
What’s your predicted runway (how many months until your company runs out of cash)?
To figure your runway, divide remaining cash by how much money you spend each month (monthly burn). You also can come up with a more conservative runway estimate by using current revenue and projected expenses. It’s best to have a minimum of 12 months of runway; 18 months is far better.
What is you conversion rate?
Your conversation rate shows both how well your business is able to sell its products/services and how much customers want to purchase them. It’s a good idea to review and track this KPI over time and tweak some things differently (pricing, for example) to see if you can improve it.
And let’s not forget profit margin:
The difference between how much a product sells for compared to the product’s actual cost. This KPI is an important indicator of your business’ scalability as well as its sustainability.
As you prepare your startup pitch presentation, run your KPIs and study them closely. Know them: they are what are going to help you get funded. Or not.
Ingenex Digital Marketing is a Michigan-based inbound marketing firm with considerable expertise helping startups market their products/services. Contact us for more information on how we can help market yours.