MRR
Monthly Recurring Revenue: Monthly total of paid customer fees.
💡 Use Case
To track predictable revenue and monitor the short-term health and growth trajectory of the business.
Key Startup Metrics Explained
A beginner's guide to the essential metrics that drive startup growth. Understand what they are and why they matter.
ARR
Annual Recurring Revenue: Recurring revenue on an annual basis.
💡 Use Case
For understanding the company's yearly revenue run-rate, essential for long-term financial planning and valuation.
ARPA
Average Revenue Per Account: MRR/Total # of Customers.
💡 Use Case
To see how much revenue each customer generates on average, helping to identify high-value customer segments.
Gross Profit
Gross Profit: Total revenue minus the cost of goods sold.
💡 Use Case
To measure the core profitability of the product itself before accounting for overhead and operational costs.
LTV
Lifetime Value: Prediction of the net profit from the entire future relationship with a customer.
💡 Use Case
To forecast the total value a customer brings, which helps in deciding how much to spend on acquiring them (CAC).
CAC
Customer Acquisition Cost: Full cost of acquiring one user.
💡 Use Case
To measure marketing and sales efficiency. A primary goal is to keep CAC lower than LTV.
Monthly Churn Rate
Monthly Churn Rate: Lost customers this month / prior month total.
💡 Use Case
To measure customer attrition. A high churn rate can signal problems with the product, support, or pricing.
Burn Rate
Burn Rate: Monthly cash burn rate.
💡 Use Case
To track how quickly the company is spending its cash reserves, which determines its financial runway.
DAU / MAU
Daily & Monthly Active Users: Users other than one-time users per day (DAU) or per month (MAU).
💡 Use Case
To measure user engagement and product 'stickiness'. The DAU/MAU ratio shows how often users return.
Activation Rate
Activation Rate: Number of users taking a specific action to get value out of a product.
💡 Use Case
To understand if users are reaching the 'aha!' moment that turns them into long-term, engaged customers.
Retention
Retention Rate: Percentage of an original installed base that is still transacting.
💡 Use Case
To measure how well the company keeps its customers over time. High retention is key to sustainable growth.
TAM
Total Addressable Market: Total revenue opportunity available for a product.
💡 Use Case
To estimate the maximum growth potential and market size, crucial for strategy and investor presentations.