The data points I’m obsessed with for startup growth
We’re often told that startup growth is hard. But could there be some easy opportunities for growth hiding in plain sight? My bet is that if you dive into your metrics, you’ll find them.
This is part 2 of our series on how to build the foundational pillars for scaling your startup’s growth.
We’re talking about metrics analysis and becoming obsessively data-driven. For some startup founders, this is the ultimate snoozefest. Others spend way too much time staring at the numbers, without doing anything about them.
But if you want to grow your startup, then getting data-driven is a non-negotiable.
In this post, I’m going to go through the data points that I look at regularly to assess how Groove’s growth is tracking.
I’ve also created this video, where I walk you through our actual revenue metrics, funnel metrics, and financial metrics, highlighting the data points that I zero in on. If you’re looking for all the details and an inside look into how I think about my metrics, then I highly recommend you watch this video. You’ll get eyes on the good, the bad, and the ugly.
I hope you’ll be inspired to dig into your company’s metrics to uncover the growth opportunities that are lurking there.
After ten years in the game, I’ve finally set up a metrics dashboard where I can see all our metrics at a glance.
Our metrics “tech stack” includes:
- Baremetrics for Revenue Metrics. Alternatives include Stripe, ProfitWell, and ChartMogul
- PostHog for Funnel Metrics. Alternatives include Amplitude and MixPanel
- Our own Notion Template with Funnel Metrics
- Income Statement prepared by our accountants for Financial Metrics
If you’re not currently tracking your metrics, then today is the best time to start. Some of the services above have free tiers available, but most are reasonably priced and well worth the investment for the insights you’ll get.
For Groove, the metrics that I immediately look at are:
- Growth Rate
- Net Revenue Churn
- Active Customers, which is a subject of New Customers and Churned Customers
- Unit Economics, specifically Average Revenue per Customer (ARPU) and Lifetime Value (LTV)
This is the overall metric we’re looking to raise.
We’re aiming to grow between 1% and 3% month over month. We’re currently averaging around 1,5%, with a campaign in May 2023 getting us up to a 6% growth rate.
Retention and Customer Churn
I start by taking a quick look at these metrics because they usually give me good news. Our Retention Rate is very good — we have a very sticky product and a high average customer lifetime.
Our Customer Churn is well within industry benchmarks.
So, we’re good here.
Net Revenue Churn
This is one of my favorite metrics to track because it gives me a clear picture of whether the experiments we’re working on are collectively working.
When I look at a metric like Net Revenue Churn, I like to compare it to the previous period. So if I’m looking at the last six months, I’ll compare it to the previous six months, or to the same calendar months of the previous year. This gives me a good indication of whether we’re progressing in the right direction.
Active Customers is a subject of New Customers and Churned Customers.
Right now, our number of New Customers is a red flag for me. As I mentioned, our Churned Customer number is within acceptable levels, but we are not getting enough net new customers consistently. This jeopardizes our Active Customer number.
So, what do you do when you notice a negative metric like, in our case, New Customers?
Well, I’ll admit that in the past, I just quickly scrolled past that metric, hoping that it would improve in time. That’s not only a terrible idea, it's also a missed opportunity.
Now, when I see a metric I don’t like, I ask myself, “Why?” Because the metric itself is less important than the “why” behind that metric. As I dig into the answer to that question, I start uncovering the growth opportunities.
So when you see those negative metrics, don’t scroll past. Instead, dig into what’s happening below the surface and uncover the growth opportunities that are available to your startup.
The Unit Economics I focus on are Average Revenue per Customer (ARPU) and Lifetime Value (LTV). Knowing these values helps me to make decisions about ROI on initiatives like paid advertising.
As I mentioned, we use PostHog for tracking our funnel metrics (as well as a bunch of other useful features). However, I’ve recently created a Notion template, which functions as my growth dashboard.
We use Dave McClure’s Pirate Metrics Framework and we track our metrics based on their stage in the funnel. I’ve found industry benchmarks for most of these metrics so that we can compare our performance to good industry standards. I don’t see this as a comparison game, but rather as yet another way to uncover opportunities for us to grow. If other companies in our industry are doing it, then it’s possible for us to do it too.
Here’s a screenshot of our latest Pirate Metrics. If you’d like to get more insight into how I use this dashboard and my thinking behind the various metrics, then be sure to watch the video.
The funnel metrics I’m obsessed about at the moment are primarily at the Acquisition and Activation levels of the funnel. The reason for this comes back to that New Customer number that we’re looking to increase.
Specifically, the metrics that I look at every day are:
- Visitor-to-Trial %
- Trial-to-Paid %
- Activation % (for Groove, activation happens when a trial customer sets up a shared inbox)
I go through our Profit and Loss Statement on a monthly basis. The metrics I zoom in on are:
- EBITDA (Earnings Before Interest, Tax, Depreciation, and Amortization)
- Rule of 40%
EBITDA gives me a good indication of the company’s overall profitability.
The Rule of 40% is a rough guide to balance growth spend and profit. Right now we’re performing well on the Rule of 40% because we have good cash flow in the business and a good profit margin. However, we have plenty of room within that 40% to spend on growth initiatives, even if it means a lower profit margin.
OK, so I’ve hit you with a lot of numbers and data points. These are the data points that are important for Groove right now. You might need to focus on different data points for your startup (although I would argue that most of the metrics I’ve highlighted here would be important to most startups).
Wherever you’re at, I’d like to leave you with three key lessons:
- Track your metrics, if you’re not tracking them already. Start with a simple free tool like ProfitWell and then keep upgrading from there.
- Don’t be afraid of your metrics. Dig into them and truly analyze them. If you don’t like what you see, ask yourself what’s going on below the surface. Formulate a hypothesis and then create an experiment that will improve that particular metric.
- Be systematic about metrics analysis and commit to being data-driven. Set times to check in daily, weekly, monthly, or quarterly (depending on the metric concerned).
And remember, whether you’re at $10K, $100K, or $500K MRR — or even if you’re starting from zero, we’re here for you.
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The startup journey continues. This time, we’re 10X’ing the transparency. Funnel metrics, financials, growth experiments & more — nothing is off-limits. We're learning a lot and so will you.