Whether you're an early-stage startup founder or deep into a Series C, it's crucial to understand the importance of tracking your financial metrics regularly. Here are seven financial metrics every founder should monitor in order to achieve success.
It’s a tale as old as time – founders squandering tens of millions of investor dollars because they neglected to be mindful of their spending. The burn rate tracks your monthly spending and tells you what you need to produce in revenues to break even and eventually become profitable. Essentially it’s a measurement of how fast a company spends its available supply of cash.
In 2012, wealth management expert Chad Willardson learned the importance of cash runway the hard way after investing in a fintech startup that later filed for bankruptcy.mean. We had an investor call and found out that expenses were four times what the budgeted monthly expenses were projected to be. I learned a great lesson from observing these mistakes,” says Willardson.
However, as time goes on and you have more data points on your customers, CLV becomes more accurate because it's based on historical data instead of just one measurement at the beginning of the customer journey.Startups that fail to tighten the financial screws risk losing customers and funding. Churn rate is the percentage of customers who discontinue using your services over a given period. This metric can be assessed daily, weekly, monthly, or annually, depending on your business type.
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