By Nitya Shah
In 2022 we saw fundraising slow down as interest rates and inflation rose, geopolitical difficulties emerged, and the economy began to decline. But if 2022 was a year of paradigm-shifting dynamics, 2023 will be a year when clearer criteria for measuring success will emerge.
Having said that, experts agree that investors and start-ups in India are prepared to tackle future challenges and develop resilience. This is supported by research from Redseer Strategy Consultants, which notes that India may witness over 80 IPOs of profitable start-ups over 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 digital. As a startup, it is critical to determine revenue and the impact of engagement by tracking key metrics. Measuring metrics can enable startups to identify trends, set goals, and analyse information. While startups track their growth rate as a key metric, here are a few more critical metrics which can be measured.
- Churn: The worst adversary of a startup is customer churn. It determines how many clients you lose in a predetermined amount of time. Additionally, it is difficult to keep customers over the long run because customers are continually being exposed to the greatest new tools and apps. If your churn rate is higher than your customer acquisition rate, you won’t be able to grow as a startup because your customer base must expand. You won’t be informed if this occurs if you don’t monitor your churn rate.
- Retention Rate: Startups should not get fixated on acquiring new customers. Instead, they should focus on retaining existing customers. The pandemic fueled demands saw product lines soar however, with the current economic climate, retaining existing customers is simpler and less expensive than finding new ones, as they spend more and purchase more frequently as well as recommend your business to others.
- Burn Rate: Burn rate is indicative of how quickly a startup is spending money. It determines your cash runway so you may choose whether to make expense reductions or increase spending on activities like marketing or recruiting new personnel. It’s crucial to regularly review your burn rate to look for leaks or other signs that your company is spending money on unnecessary expenses.
- Daily and Monthly Active Users: Customers who use your product on a daily basis are counted as active daily users (DAU), whereas those who use it at least once per month are counted as monthly active users (MAU). Active users metric determines whether or not your paying customers are receiving value from your product, much like activation rate does. A high number of daily active users indicates that you are doing something well and giving your clients a positive experience. On the other side, a low score for both of these indicators may be a sign that churn is going to occur.
There are numerous startup metrics that gauge a company’s growth. It’s crucial to keep in mind that rapid growth doesn’t always signify long-term success because every firm is different and everyone aspires to be successful. Instead, slower growth might enable you to keep tabs on every move your startup business makes and pinpoint what has to be altered for real success. However, measures like sales, marketing, and market size and opportunity might offer clues about what the future of your new company might include. Knowing your starting point and creating a plan to get there using metrics that guide your decisions will help you identify the problems you’ll face and how to overcome them.
The author is the lead at WebEngage Startup Program