AUTM The Startup Metrics
- 3. VP CS
- 4. VP CS C
- 9. VP CS C P KA KR C$ R$Cost < Revenue
- 12. © 2012 Steve Blank
- 13. Customer SegmentWho are they? Why do they buy?
- 14. Customer SegmentWho are they? Why do they buy? ✓ ✓
- 15. Your Customer Archetypes Drive How You Get/Keep/Grow What’s their role? How this person is evaluated / promoted / compensated? Who are they? Buyer’s name Position / title / age / sex How do they buy? Discretionary budget (name of budget and amount) What matters to them? What motivates them? Who influences them? What do they read/who do they listen to?
- 16. Customer SegmentWhere are they? How do we get them to buy?
- 18. METRICS
- 19. METRICS # of visitors # of downloads % growth
- 20. VANITY METRICS # of visitors # of downloads % growth
- 25. Startups don’t fail because they fail to make something. Startups fail because they fail to make something someone wants to buy from them.
- 27. EPIC WIN
- 28. $ time TRACTION!
- 30. $ time oops... Profit = Revenue - Cost
- 33. $$$ Value? Cost?
- 34. What does it cost to acquire one customer? CAC
- 35. How much revenue can be extracted from one customer? LTV
- 37. if CAC << LTV COST < REVENUE and then COMPANY!
- 38. METRICS
- 39. AARRR
- 41. acquisition activation retention revenue referral
- 42. 42 Example
- 43. 43 XYZ is a web application. We want to sell XYZ for $500 / month. We will find customers via ads & social media.
- 44. 44 XYZ We want to sell for $500 / month. We will find customers via ads & social media.
- 46. 46 Paid Demand @ $1500 / 1k Clicks Organic Traffic @ $0.00 Google Adwords = $1.50 per Visitor = $0.00 per Visitor
- 47. 47 Paid Demand = $1.50 / Visitor Organic Traffic = $0.00 / Visitor Suppose half of the visitors came from the ads … … and half came from tweets, etc.
- 48. 48 Cost per Visitor = $0.75
- 49. 49 sign up now!
- 50. 50 sign up now! you@gatech.edu submit email Learn about XYZ! We can’t wait to tell you all about XYZ! Give us your email and we’ll be in touch soon!
- 51. 51 Cost per Visitor = $0.75 Visitor to Raw Lead 3% Raw Lead Cost = 0.75 0.03 = $25
- 52. 52 you@gatech.edu submit email Learn about XYZ! We can’t wait to tell you all about XYZ! Give us your email and we’ll be in touch soon! you@gatech.edu Leads me@gatech.edu us@gatech.edu we@gatech.edu
- 53. 53 Cost per Visitor = $0.75 Visitor to Raw Lead 3% Raw to Qualified Lead 20%
- 54. 54 Cost per Visitor = $0.75 Visitor to Raw Lead 3% Raw to Qualified Lead 20% Qualified Lead Cost = 0.75 0.03 * 0.20 = $125
- 56. 56 Cost per Visitor = $0.75 Visitor to Raw Lead 3% Raw to Qualified Lead 20% Closed Deal Cost = 0.75 0.03 * 0.20 * 0.10 = $1250 Qualified Lead to Closed Deal 10%
- 57. 57 Cost per Visitor = $0.75 Visitor to Raw Lead 3% Raw to Qualified Lead 20% = $1250 Qualified Lead to Closed Deal 10% Marketing Cost Sales Cost = ?
- 58. 1 closed deal 10 qual. leads 50 raw leads 1,667 visitors marketing 58 10% 20% 3% sales
- 59. 59 Visitors Raw Leads (RLC) 50 Qualified Leads (QLC) 10 Closed Deals (CDC) 1 Sales Cost Sales Cost = (1,667 * RLC) + (50 * QLC) + (10*CDC) 1,667
- 60. closed deal qual. to closed raw to qual. visitor to raw cost 60 - - - $200 $20 $2 sales action
- 61. 61 Visitors Raw Leads 50 Qualified Leads 10 Closed Deals 1 Sales Cost Sales Cost = (1,667 * $2.00) + (50 * $20. 00) + (10 * $200. 00) 1,667 = $3,334 + $1,000 + $2,000 = $6,334 $2.00 $20.00 $200.00
- 62. 62 3% 20% $1,250 + $6,334 10% Marketing Cost Sales Cost = $7,584CAC = Customer Acquisition Cost (CAC)
- 63. 63 LTV = ? Lifetime Value of a Customer (LTV)
- 64. 64 Average Revenue Per User (ARPU) ARPU = Total Revenue Customers Lifetime Value of a Customer (LTV)
- 65. 65 Average Revenue Per User (ARPU) ARPU = Total Revenue Customers Gross Margin = Revenue - Cost Revenue Lifetime Value of a Customer (LTV)
- 66. 66 LTV = ARPU * Gross Margin not quite... Lifetime Value of a Customer (LTV)
- 67. 67 How long is someone a customer? churn = leave stay
- 68. 68 Churn at 1% month 1 2 3 4 5 100 99 98 97 96 … at 3% 100 97 94 91 88 … at 5% 100 95 90 86 81 … at 10% 100 90 81 73 66 … Churn # months = 1
- 69. 69 LTV= ARPU * Gross Margin Churn Lifetime Value of a Customer (LTV)
- 70. 70 LTV= 0.01 Suppose ARPU = $500 per month & Gross Margin = 40% & Churn = 1% per month 1% $500 * 0.4 = $20,000 Lifetime Value of a Customer (LTV)
- 71. 71 $1,250 + $6,334 Marketing Cost Sales Cost = $7,584CAC = LTV= 0.01 $500 * 0.4 = $20,000 ARPU Gross Margin Churn
- 72. 72 $1,250 + $6,334 Marketing Cost Sales Cost = $7,584CAC = LTV= 0.01 $500 * 0.4 = $20,000 ARPU Gross Margin Churn SUCCESS!
- 73. 73 $1,250 + $6,334 Marketing Cost Sales Cost = $7,584CAC = LTV= 0.03 $500 * 0.4 = $6,667 ARPU Gross Margin Churn FAIL!
- 74. How do you estimate churn?
- 75. acquisition activation retention revenue referral
- 76. acquisition activation revenue The Happiness Metrics retention referral
- 78. VP CS C P KA KR C$ R$Cost < Revenue CAC << LTV
- 79. The Balancing Act Viral effects Inbound Marketing Free or Freemium Open Source Free Trials Scalable Pricing Cross Sell/Upsell Product line expansion Lead Gen for 3rd parties Touchless conversion Inside Sales Channels Strategic partnerships CAC LTV
- 80. The Balancing Act Viral effects Inbound Marketing Free or Freemium Open Source Free Trials Touchless conversion Inside Sales Channels Strategic partnerships Field Sales Outbound Marketing Scalable Pricing Cross Sell/Upsell Product line expansion Lead Gen for 3rd parties High Churn Rates Low customer satisfaction CAC LTV
- 81. What Investors are Looking For? A well ‘balanced’ business model! CAC LTV
- 82. if CAC << LTV COST < REVENUE and then COMPANY!
- 84. Value proposition product cost, mkt size/share, competition? Customer Relationships customer acquisition costs, conversion rates, lifetime value? Market Type revenue curves Operating Costs basic operating costs of the business? Channel Channel margin, promotion, shelf-space charges? Revenue Streams average selling price, # of customers/year, achievable revenue? Burn Rate per month? When will the company run out of cash? Metrics That Matter
- 85. CAC Customer Acquisition Cost CAC = marketingCosts + salesCosts # of customers goal: CAC
- 86. LTV Lifetime value of the customer LTV = ARPU * grossMargin churnRate goal: LTV
- 87. ARPU Average Revenue Per User ARPU = Revenue # of Customers ARPU LTV
- 88. Gross Margin a glimpse at the profit grossMargin = Revenue - Costs Revenue grossMargin LTV
- 89. Gross Margin a glimpse at the profit grossMargin = Revenue - Costs Revenue goals: Costs Revenue
- 90. Pricing connection between price and margin price = cost 1 - grossMargin $167 = $100 1 - 0.4 example
- 91. Burn Rate How fast are you using up your cash? burnRate = $$$ spent # of months goal: Costs
- 92. Length of Runway How long do you have left? runway = $$$ available burnRate goals: Costs Revenue
- 93. Revenue Goals What you want to see 0 17.5 35 52.5 70 April June Un2tled 1 Un2tled 3 Un2tled 5 Un2tled 7 time revenue
- 94. Revenue Goals What you want to see 0 17.5 35 52.5 70 April June Un2tled 1 Un2tled 3 Un2tled 5 Un2tled 7 time revenue d$ dt
- 95. Revenue Goals … the real question is: 0 17.5 35 52.5 70 April June Un2tled 1 Un2tled 3 Un2tled 5 Un2tled 7 time revenue d$ dt how many customers?
- 96. New Customers Needed Connecting revenue to sales # needed = revenue goal LTV