Startup Metrics That Matter

Recurring subscriptionThe process of buying new units in a fund by submitting money and a valid instruction. revenue normalised to one year.

Example: ₦10 million MRR implies ₦120 million ARR before adjustments.

Annual Recurring RevenueRevenue expected to repeat under subscriptions, contracts, or ongoing customer relationships. means recurring subscription revenue normalised to one year; the measure turns an operating or financial relationship into a comparable measure. Its definition determines which revenue, customer, cost or time-period data enter the calculation.

₦10 million MRR implies ₦120 million ARR before adjustments.

A practical review of Annual Recurring Revenue compares growth with unit economics and cash flow rather than treating one operating metric as a complete picture of the company; the measure can improve because of a definition change rather than better economics.

The rate at which a company spends cash, commonly measured monthly.

Example: A startup spending ₦15 million net each month has a ₦15 million burn rate.

Burn Rate is the rate at which a company spends cash, commonly measured monthly. Gross burn measures total cash spent, while net burn measures the monthly decline in cash after revenue and other inflows.

A startup spending ₦15 million net each month has a ₦15 million burn rate. For Burn Rate, management and investors should use the same cohort, period and exclusions before comparing the number.

For Burn Rate, state the formula, period, cohort, currency and data source; reconcile the inputs with financial statements or operating records and track the measure consistently over time. Its historical value may not survive changes in pricing, competition or customer mix.

The estimated time before cash runs out at the current burn rate.

Example: ₦120 million cash and ₦10 million monthly burn provide 12 months of runway.

Cash Runway is the estimated time before cash runs out at the current burn rate. Runway is a forecast, not a bank-account fact. Hiring, revenue growth, financing and one-off payments can change it rapidly.

₦120 million cash and ₦10 million monthly burn provide 12 months of runway.

Evaluate Cash Runway by rebuilding it from underlying customer, revenue or cash data and by testing how acquisitions, pricing changes and classification choices affect the trend; the measure can improve because of a definition change rather than better economics.

The percentage of customers or recurring revenue lost during a period.

Example: A service losing 20 of 1,000 customers in a month has 2% customer churn.

Churn Rate is the percentage of customers or recurring revenue lost during a period; the measure links company activity to economics such as growth, retention, unit profitability or cash consumption.

A service losing 20 of 1,000 customers in a month has 2% customer churn.

Before relying on it, inspect the numerator and denominator separately, compare gross and net versions where relevant and identify the assumptions management can change; a strong result does not compensate automatically for weak cash flow or excessive acquisitionThe purchase of control or ownership of a company or business. cost.

Analysis of customer groups that started during the same period or share a characteristic.

Example: The company compares retention for January and February signup cohorts.

Cohort Analysis describes analysis of customer groups that started during the same period or share a characteristic; the reported value of the measure depends on the numerator, denominator, accounting basis and whether the figure is measured at a point in time or across a period.

The company compares retention for January and February signup cohorts. For Cohort Analysis, management and investors should use the same cohort, period and exclusions before comparing the number.

A practical review of Cohort Analysis compares growth with unit economics and cash flow rather than treating one operating metric as a complete picture of the company; the measure can improve because of a definition change rather than better economics.

Revenue minus variable costs, expressed in amount or percentage.

Example: A ₦5,000 sale with ₦3,000 variable cost has ₦2,000 contribution margin.

Contribution Margin means revenue minus variable costs, expressed in amount or percentage; the measure turns an operating or financial relationship into a comparable measure. Its definition determines which revenue, customer, cost or time-period data enter the calculation.

For example, a ₦5,000 sale with ₦3,000 variable cost has ₦2,000 contribution margin. For Contribution Margin, management and investors should use the same cohort, period and exclusions before comparing the number.

For Contribution Margin, state the formula, period, cohort, currency and data source; reconcile the inputs with financial statements or operating records and track the measure consistently over time. Its historical value may not survive changes in pricing, competition or customer mix.

Sales and marketing cost required to acquire one customer under the stated method.

Example: ₦5 million spent to gain 500 customers gives ₦10,000 CAC.

Customer Acquisition Cost describes sales and marketing cost required to acquire one customer under the stated method. CAC should include the sales and marketing resources used to acquire customers and should be matched to the same customer cohort used in the revenue analysis.

₦5 million spent to gain 500 customers gives ₦10,000 CAC.

A practical review of Customer Acquisition Cost compares growth with unit economics and cash flow rather than treating one operating metric as a complete picture of the company.

Estimated gross economic value generated by a customer over the relationship.

Example: A customer producing ₦60,000 gross profitRevenue minus the direct cost of goods or services sold. over time has ₦60,000 LTV.

Customer Lifetime Value describes estimated gross economic value generated by a customer over the relationship. LTV is highly sensitive to churn, gross marginGross profit expressed as a percentage of revenue. and the period over which customer behaviour is observed. Extrapolating from a young cohort can produce implausibly large values.

A customer producing ₦60,000 gross profit over time has ₦60,000 LTV.

Before relying on it, inspect the numerator and denominator separately, compare gross and net versions where relevant and identify the assumptions management can change; the measure can improve because of a definition change rather than better economics.

The total value of goods or services transacted through a marketplace before deductions.

Example: A marketplace processes ₦2 billion of orders in a month.

Gross Merchandise Value is the total value of goods or services transacted through a marketplace before deductions; the reported value of the measure depends on the numerator, denominator, accounting basis and whether the figure is measured at a point in time or across a period.

A marketplace processes ₦2 billion of orders in a month.

For Gross Merchandise Value, state the formula, period, cohort, currency and data source; reconcile the inputs with financial statements or operating records and track the measure consistently over time. The measure can improve because of a definition change rather than better economics.

Recurring revenue retained from existing customers before counting upgrades or expansion.

Example: Churn and downgrades reduce GRR to 88%.

Gross Revenue Retention means recurring revenue retained from existing customers before counting upgrades or expansion; the measure should be calculated from a consistent cohort and period because changes in classification can create apparent improvement without a change in the business.

Churn and downgrades reduce GRR to 88%. For Gross Revenue Retention, management and investors should use the same cohort, period and exclusions before comparing the number.

For Gross Revenue Retention, state the formula, period, cohort, currency and data source; reconcile the inputs with financial statements or operating records and track the measure consistently over time. Its historical value may not survive changes in pricing, competition or customer mix.

Recurring subscription revenue normalised to one month.

Example: Five hundred customers paying ₦20,000 monthly produce ₦10 million MRR.

Monthly Recurring Revenue means recurring subscription revenue normalised to one month; the reported value of the measure depends on the numerator, denominator, accounting basis and whether the figure is measured at a point in time or across a period.

For example, five hundred customers paying ₦20,000 monthly produce ₦10 million MRR. For Monthly Recurring Revenue, management and investors should use the same cohort, period and exclusions before comparing the number.

For Monthly Recurring Revenue, state the formula, period, cohort, currency and data source; reconcile the inputs with financial statements or operating records and track the measure consistently over time. Its historical value may not survive changes in pricing, competition or customer mix.

Recurring revenue retained from existing customers after upgrades, downgrades, and churn.

Example: Expansion revenue lifts NRR above 100%.

Net Revenue Retention means recurring revenue retained from existing customers after upgrades, downgrades, and churn. NRR above 100% means expansion revenue from retained customers more than offset downgrades and churn; it says nothing about the cost of acquiring new customers.

Expansion revenue lifts NRR above 100%.

A practical review of Net Revenue Retention compares growth with unit economics and cash flow rather than treating one operating metric as a complete picture of the company.

Evidence that a product satisfies strong, repeatable demand in a target market.

Example: Retention and referrals improve because customers repeatedly rely on the product.

Product-Market Fit describes evidence that a product satisfies strong, repeatable demand in a target market; the reported value of the measure depends on the numerator, denominator, accounting basis and whether the figure is measured at a point in time or across a period.

Retention and referrals improve because customers repeatedly rely on the product.

A practical review of Product-Market Fit compares growth with unit economics and cash flow rather than treating one operating metric as a complete picture of the company; its historical value may not survive changes in pricing, competition or customer mix.

The portion of the total market that a company's product and geography can serve.

Example: The startup focuses on private clinics in West Africa.

Serviceable Available Market is the portion of the total market that a company's product and geography can serve; the measure links company activity to economics such as growth, retention, unit profitability or cash consumption.

The startup focuses on private clinics in West Africa. For Serviceable Available Market, management and investors should use the same cohort, period and exclusions before comparing the number.

Before relying on it, inspect the numerator and denominator separately, compare gross and net versions where relevant and identify the assumptions management can change.

The realistic share of the serviceable market a company can capture over a stated period.

Example: The plan targets 5% of eligible clinics within five years.

Serviceable Obtainable Market is the realistic share of the serviceable market a company can capture over a stated period; the measure should be calculated from a consistent cohort and period because changes in classification can create apparent improvement without a change in the business.

For example, the plan targets 5% of eligible clinics within five years.

Before relying on it, inspect the numerator and denominator separately, compare gross and net versions where relevant and identify the assumptions management can change; the measure can improve because of a definition change rather than better economics.

Platform revenue divided by the value of transactions processed.

Example: ₦100 million revenue on ₦2 billion GMV gives a 5% take rate.

Take Rate describes platform revenue divided by the value of transactions processed; the measure links company activity to economics such as growth, retention, unit profitability or cash consumption.

In formula form, the measure uses platform revenue as the numerator and the value of transactions processed as the denominator. ₦100 million revenue on ₦2 billion GMV gives a 5% take rate.

Before relying on it, inspect the numerator and denominator separately, compare gross and net versions where relevant and identify the assumptions management can change; its historical value may not survive changes in pricing, competition or customer mix.

The total revenue opportunity if a product captured all demand in its defined market.

Example: The company estimates the full market for digital clinic software.

Total Addressable Market is the total revenue opportunity if a product captured all demand in its defined market; the measure turns an operating or financial relationship into a comparable measure. Its definition determines which revenue, customer, cost or time-period data enter the calculation.

For example, the company estimates the full market for digital clinic software.

Before relying on it, inspect the numerator and denominator separately, compare gross and net versions where relevant and identify the assumptions management can change; the measure can improve because of a definition change rather than better economics.

Revenue, cost, and profit relationships measured per customer, transaction, or unit.

Example: A delivery business compares contribution per order with acquisition cost.

Unit Economics describes revenue, cost, and profit relationships measured per customer, transaction, or unit; the measure turns an operating or financial relationship into a comparable measure. Its definition determines which revenue, customer, cost or time-period data enter the calculation.

A delivery business compares contribution per order with acquisition cost. For Unit Economics, management and investors should use the same cohort, period and exclusions before comparing the number.

A practical review of Unit Economics compares growth with unit economics and cash flow rather than treating one operating metric as a complete picture of the company; its historical value may not survive changes in pricing, competition or customer mix.