Metrics That Matter: How Startups Can Unlock Growth in 2023 Amid Global Headwinds
By Nitya Shah
In 2022, we saw fundraising slow as interest rates and inflation rose, geopolitical difficulties emerged and the economy began to slow. But if 2022 was a year of paradigm-shifting dynamics, 2023 will be a year when clearer criteria for measuring success will emerge.
That said, experts agree that investors and startups in India are prepared to tackle future challenges and develop resilience. This is supported by research from Redseer Strategy Consultants, which points out that India could witness over 80 IPOs of profitable start-ups in the next five years.
Startups are changing, bringing in fresh talent and cutting-edge technology. The customer and employee experience is being fundamentally redesigned as they embrace the ubiquitous nature of digitality. As a startup, it’s critical to determine revenue and the impact of engagement by tracking key metrics. Measuring metrics can enable startups to identify trends, set goals, and analyze information. While startups track their growth rate as a key metric, here are a few more critical metrics that can be measured.
- Churn: A startup’s worst enemy is churn. It determines how many customers you lose over a predetermined period of time. In addition, it is difficult to retain customers in the long term because customers are continuously exposed to the best new tools and apps. If the churn rate is higher than the customer acquisition rate, you won’t be able to grow as a startup because your customer base needs to expand. You will not be informed if this happens if you do not monitor the churn rate.
- Retention rate: Startups should not be fixated on acquiring new customers. Instead, they should focus on retaining existing customers. Post-pandemic demand led to a surge in product lines, but in the current economic climate, it’s easier and less expensive to keep existing customers than to find new ones, as they spend more and buy more often and recommend your business to others.
- Burning rate: Burn rate is an indication of how quickly a startup spends money. It determines your cash runway, so you can choose whether to reduce spending or increase spending on activities such as marketing or recruiting new staff. It’s critical to regularly review your burn rate to look for leaks or other signs that your business is spending money on unnecessary expenses.
- Daily and monthly active users: Customers who use your product on a daily basis are considered daily active users (DAUs), while those who use it at least once a month are considered monthly active users (MAUs). The active user metric determines whether your paying customers are receiving value from your product, much like the activation rate does. A high number of daily active users indicates that you are doing something well and giving your customers a positive experience. On the other hand, a low score for both of these indicators can be a sign that churn is going to happen.
There are many startup metrics that measure a company’s growth. It is important to remember that rapid growth does not always mean long-term success because all firms are different and all want to succeed. Instead, slower growth can allow you to watch every move your startup makes and figure out what needs to change for real success. However, measures such as sales, marketing, and market size and opportunity can provide clues as to what the future of your new company may entail. Knowing your starting point and creating a plan to get there using metrics to guide your decisions will help you identify the problems you will face and how to overcome them.
The author is the leader of the WebEngage Startup Program
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