Business metrics tell a story of your how your business is performing across a wide range of segments一whether it be finance, marketing, operations, sales and more. Metrics also allow you to compare to industry benchmarks, giving you a clear idea of what’s working and what’s not.
Plus, by keeping track of the right metrics for your business, founders are able to make informed decisions on how to grow strategically or make adjustments where necessary.
Knowing your metrics is also useful when it comes to fundraising as investors would always look at the numbers to understand how your business is performing.
To help you understand the (many) different types of business metrics to use when quantifying performance and how to calculate them, we’ve compiled our ultimate business metrics glossary below.
The percentage of new users who perform a key action within a given period. This metric allows businesses to track how successful their onboarding process is and if they attract the right customers.
The average yearly revenue for one customer contract (usually excluding any one-off fees).
This metric is helpful compared to other metrics like Annual Recurring Revenue or Customer Acquisition Cost. It shows how long it takes to win back the money needed to acquire a new customer. Or how the value of one customer compares to others.
The predictable revenue generated by a SaaS or subscription company from all its active subscriptions normalised for a single calendar year.
To calculate ARR, you must include recurring revenue from add-ons and plan upgrades. But you must also take into account downgrades and churned customers.
Note: ARR can’t be used for monthly contracts even though the total subscription time lasts for more than a year. It is only for contracts that last at least 12 months.
A projection of future total revenue based on past, short-term revenue, assuming that current conditions continue. (Also called Revenue Run Rate or Sales Run Rate)
Annual run rates are typically calculated based on MRR or quarterly revenue. This is a handy metric to calculate future revenue, but it doesn’t consider seasonality or one-off payments.
The average amount of money a customer spends on a single order from an e-commerce site over a given time.
This metric is useful in helping retailers understand the purchasing behaviours of their customers. Over time, the goal for e-commerce business owners is to increase the AOV for each customer and lower CAC.
The average amount of money a company can expect to generate from one subscriber, user or customer over a specified period. Also called Average Revenue Per Account (ARPA).
This metric is used to compare different acquisition channels within a company or to compare the potential of companies.
The average sales value of a company’s transactions.
Depending on the business model, companies can calculate the Average Purchase Value based on the annual, monthly, weekly, daily, or contractual value.
The average session length of users on a website. A website session starts as soon as a visitor lands on your website and ends when they leave or remain inactive for some time.
The amount on invoices due for payment according to the terms in a contract.
Billings can happen once or in different installments depending on the type of contract. This metric shows how much cash you will collect in a certain period. Hence, it gives insight into a start-ups short-term financial health.
The total value of all contracts over one year, including one-time fees.
A booking occurs when a customer commits to paying for a service. It converts into revenue once the service is delivered. Bookings are important to predict a start-up’s future revenue.
The percentage of visitors who enter a website and leave after only viewing one page.
When a visitor bounces from a website, it may indicate that the content doesn’t meet your user’s expectations. Some contributing factors include a slow page-loading time, poor website navigation, technical errors or even misleading information.
The rate at which a company is spending its start-up capital before generating any form of positive cash flow or profit.
The burn rate is essential to calculate a start-up’s financial runway. It allows you to measure how much time the company has left to become profitable or find more funding.
The percentage of online users or shoppers who add items to their virtual shopping cart but abandon it before completing the transaction.
High cart abandonment rates indicate that online shoppers do not want to go through with their purchases because of expensive shipping costs, excessive pop-up ads, complicated checkout processes, and limited payment options.
The amount of time a company has to become profitable before they run out of cash.
Cash runway is a vital metric to track growth and profitability. A shrinking runway means companies need to work towards a more profitable model.
To calculate cash runway, start-ups usually don’t include team cash (used to pay employees) and founder cash.
The rate at which users, customers or subscribers stop using a service over a specified period. Also called Attrition Rate.
Churn is a good indicator of customer satisfaction and helps you assess the effectiveness of your customer retention efforts. A reasonable churn rate depends on the size, industry and age of your company. Rates above 20%, however, are worrying.
The percentage of users that have completed the desired action that marketers set out for their company. Depending on your business goals, these actions include buying your product or sharing your website through social media.
The number of clicks on a specific link per number of impressions.
The CTR may effectively measure the immediate response of a company’s marketing assets, but it doesn’t immediately equate to a high conversion rate. This simply indicates how well your listings, ads and keywords are performing based on the number of clicks.
The sum of all the costs needed to produce a good. Costs included in the calculation are labour, raw materials and amortisation. Sales, marketing and distribution costs are typically excluded. (Also called Cost of Sales)
A higher COGS results in lower margins. While this may be beneficial for tax purposes, net profits for shareholders will be lower.
A measure that indicates how much your business spends per new lead.
Comparing the cost per lead for different channels and campaigns shows you where to focus your efforts in the future.
A financial performance measure that evaluates the short-term liquidity or working capital of an organisation. Comparing current assets with current liabilities shows a company’s ability to pay off its debts once they are due.
Companies are advised to maintain a 2:1 ratio to better meet their financial obligations. But smaller businesses that need a lot of liquidity may not be able to maintain those numbers.
The cost and resources needed to acquire a new customer over a specific period.
CAC is an important metric to know how effective marketing budgeting is. Potential investors will also refer to a company’s CAC to examine its profitability before an investment.
The time it takes to earn back the money spent on acquiring a new customer.
Monitoring this metric is essential to understand how long it takes before a new customer becomes profitable for your business. If a customer churns before reaching the payback period, this customer costs you money.
The average revenue a company expects to generate from a customer throughout their relationship.
CLV shows how healthy your customer base is and how likely your company will grow in the future. Business experts say that your CLV should be at least three times greater than your CAC.
The average month-over-month growth for a period of six to eighteen months. Over longer periods, start-ups also calculate Compound Annual Growth Rates (CAGR).
This metric shows the average growth over a past period or predicts future development if conditions stay the same. It’s helpful to compare the average growth of companies.
The potential for loss in an investment portfolio when any single or group of exposures threaten the ability of the institution to continue operating.
Concentration risk often occurs when an organisation is too dependent on a single market to drive revenue, which causes uneven distribution of exposures to different sectors or products.
The total cost of retaining an existing customer. This includes the costs involved with customer engagement, success, service, engagement, marketing, training and other tools to retain customers.
A company’s ability to retain customers or the percentage of existing customers who stay with the business after a given period.
CSAT measures how satisfied customers are with a company’s product or service.
CSAT scores from a customer survey are based on scores from 1 to 5 (1 being ‘Very Unsatisfied’ and 5 being ‘Very Satisfied”). The scores are then tallied based on the formula below and expressed as a percentage scale.
It is important to note that it works best to measure an individual customer’s satisfaction levels instead of larger groups.
The total number of users who actively engage with a web or mobile product daily. Users must have viewed, opened or used the product to be considered active users.
As an essential measure of engagement, the DAU metric helps business owners measure various things like user behaviour and product growth rate.
The total amount of debt and financial liabilities a business has compared to the total shareholder’s equity.
The goal is a low debt-to-equity ratio since debt is risky in business. If an organisation has a high debt-to-equity ratio, it funds its growth by accumulating debt.
A payment from a customer for future goods and services that have not yet been delivered or completed. (Also known as Unearned Revenue.)
This amount is often considered a liability as the payment is only made in advance and doesn't count as revenue.
Website visits from people typing your website URL directly into your browser or through a browser bookmark. Apart from direct entries, most analytic tools like Google Analytics categorise any unrecognisable traffic source as direct traffic.
The reduction in monthly recurring revenue because existing subscribers pay less than they did the previous month.
The End Action Rate determines the effectiveness of marketing campaigns based on the last action taken by a website visitor. (Also known as conversion activity.)
Engagement is the number of people who have interacted with your content. Actions like shares, likes and comments count as engagement.
The operational costs of conducting business to generate revenue.
Typical business expenses include rent, utilities, payroll, bank fees, software subscriptions and equipment.
Free Cash Flow reveals the cash a company has at its disposal after considering cash outflows towards operations and capital assets.
The percentage of recurring revenue lost during a period due to cancellations and downgrades made by existing customers.
While this metric can be expressed annually, most businesses calculate a monthly churn rate.
The total value of goods a company sells over a certain period, usually quarterly or yearly. GMV is calculated before accrued expenses, such as advertising/marketing costs, delivery costs, discounts and returns.
The company’s profit after deducting the costs used to cover the manufacturing and distribution of its goods and services.
An analytical measure determining a company’s profitability or percentage of sales revenue that exceeds the cost of goods sold (COGS).
Mind that the gross profit margin shows the amount of profit made from a single product or service and not of the entire organisation.
The money a company receives in exchange for a product, service or capital investment.
The extra sales made thanks to a marketing or sales campaign.
The number of times your content is displayed regardless of whether it was clicked on or not. If the same person sees the same content twice, it counts as two impressions.
The annual rate of growth of an investment, expenditure or project.
The IRR helps investors predict the profitability of an investment. Similarly, it’s a good indicator of an investment fund’s track record.
The position of your webpage on the search results pages for a particular search query.
The percentage of website visitors that end up converting to leads.
The percentage of sales in an industry generated by one particular company.
Marketshare indicates the size of a company in a market.
The total number of users who actively engage with a web or mobile product monthly. Users must have viewed, opened or used the product to be considered active users.
The monthly rate at which a metric increases or decreases.
The MoM growth rate reveals the change of a particular metric as a percentage of the previous month’s value. If you want to calculate the growth over several months, see CMGR.
The predictable revenue generated by a SaaS or subscription company from all its active subscriptions in a specific month. Generally, a company’s MRR includes recurring charges such as add-ons, coupons and discount codes.
This metric helps businesses create adequate budgets and predict future cash flow.
The net percentage of total MRR lost from existing subscriptions/customers during a period, taking into account the MRR gained from expansions and upgrades from your remaining customers.
Businesses should aim for a net negative churn rate as it indicates that the revenue contribution brought by the existing customer base is expanding.
Net income indicates the total profit a company has made over an accounting period after paying income taxes, business expenses and interest. (Also known as net earnings.)
The percentage of revenue that is recorded as profit.
Net profit margin is an essential metric to measure a company’s efficiency to turn sales into profit.
The ratio of recurring revenue retained from existing customers during a specific period, including upgrades and downgrades.
An NRR of over 100% indicates growth while a lower percentage indicates a decreasing revenue.
An index to measure a customer’s overall satisfaction with a company’s product or service and their loyalty to the brand.
On a scale of 0 to 10, customers are asked how likely they are to recommend a brand to others. Their responses determine the company’s final NPS. Scores ranging from 0 to 6 are detractors while 9s and 10s are promoters.
A company’s net income after deducting the cost of goods sold (COGS), operating expenses, amortization and depreciation.
Website visits that come from unpaid sources such as search engines queries.
Website visits from visitors who land on your website via advertisements or paid promotions such as Facebook Ads, Google Ads, or other paid traffic sources.
Such search ads allow companies to appear first and rank higher in Search Engine Results Pages (SERPs) in exchange for a fee, allowing for targeted search results, increased visibility, and greater traffic.
An indicator of a company’s short-term liquidity and ability to pay its current liabilities. Since this metric is only concerned with liquid assets, inventories from current assets are excluded from this calculation.
A quick ratio of 1 is normal. It means a company has exactly enough assets to instantly pay its current liabilities. A company with a quick ratio lower than 1 may not be able to fully pay its current liabilities in the short term, while a company with a quick ratio higher than 1 can easily cover its current liabilities.
The estimated total number of unique people who see your content on social media.
Reach can be categorised into three groups: organic reach, paid reach and viral reach.
Repeat customers are those who have made at least two purchases with a particular company.
The revenue earned for every dollar spent on a marketing or advertising campaign.
This metric helps marketers evaluate the success of their promotional efforts and how they can improve.
A performance metric to measure the profitability of an investment or compare different investments.
The rate at which customers return purchases.
The income generated over a period through business operations and activities.
In a company’s income statement, the revenue generally appears first as it is a critical number to monitor its financial health.
The rate at which a company’s sales grow over a given period.
The amount of inventory sold compared to the total amount of inventory received in a period.
This metric is used to monitor the overall efficiency of your supply chain and assess how quickly your product or service can turn into revenue from the initial investment.
Website visits via social media platforms, networks and channels. Social traffic can be either organic or paid traffic.
The total revenue available assuming that 100% market share is achieved. (Also known as Total Available Market.)
The total revenue of a contract with one client. This includes factors such as recurring revenue, service fees and other charges accumulated over the stated contract period.
The number of new users a current customer successfully refers to your business.
A viral coefficient of one means that every existing user brings exactly one new user on board.
The increase or decrease in visitors to your website.
The number of website visitors for each traffic source.
While website traffic can be driven from external campaigns like paid search, social media, and ads, the three main traffic sources are organic searches, direct traffic, and referral traffic.
The amount of available capital a company has for day-to-day operations and business activities.
Considering unforeseen events and seasonal cash flow differences, analysing an organisation’s working capital is key to determining a company’s financial health.