Use Metrics to show your progress
Today, we’ll talk about knowing your metrics
Investors look for the metrics in your business so it’s important to know them. There are three levels of metrics you can use:
Activity metrics show the basic activity of the business
Unit economic metrics show the unit economic model including cost of customer acquisition and revenue.
Growth metrics show the growth in the user base and usage of the product.
Activity metrics show number of users, downloads, registrations and the like. They fall short of business results such as closed sales. If nothing else focus on the customer engagement numbers you have.
If your company is pre-revenue you can show how the business model is “profitable” by using unit economic numbers. At its core, you show the cost and process to generate leads, qualify, and close them for revenue.
In the early days of a business the revenue is small. Most investors know that and don’t expect large revenue. What they look for is repeatable and predictable revenue. Showing unit economics demonstrates you have a core business model that is working and with time and funding can improve.
Growth metrics show the number of users increasing and their usage of the product increasing. Daily active or monthly active users should be going up and to the right. If the business has seasons or cycles, then one can use a six month moving average to show your growth rate.
In summary, if you can only show activity metrics then do so. If you can show unit economic metrics, that will help. The best metrics show growing users and usage.
Whatever you do, don’t show up empty-handed.
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Copyright (c) 2020, Hall Martin and investorconnect.org. All rights reserved.
Hall T Martin is the director of Investor Connect, which is a 501(c)(3) nonprofit dedicated to the education of investors for early-stage funding. All opinions expressed by Hall and podcast guests are solely their own opinions and do not reflect the opinion of Investor Connect. This podcast is for informational purposes only and should not be relied upon for the basis of investment decisions.