![METRIC DEFINITION
MONTHLY REVENUE Total Revenue recognized for services rendered in a given month
REVENUE CMGR
(Compound Monthly Growth Rate)
Implied compounded monthly revenue growth rate between two disparate months [CMGR = (latest month
revenue / first month revenue) ^ (1 / # of months) -1]
REVENUE RETENTION
Total revenue from customers in the current month who were also customers in the previous month/ total
revenue from all customers in the prior month. Also often looked at on an annual basis
GROSS MARGIN
Gross profit in a given month / total revenue in the same month (gross profit equals total revenue less cost
of sales and goods sold)
10
USAGE-BASED
(cont’d)](https://image.slidesharecdn.com/anuhariharan-ninebusinessmodelsandthemetricsyoushouldtrack-converted-200818100924/85/Nine-business-models-and-the-metrics-you-should-track-converted-10-320.jpg)
![METRIC DEFINITION
MRR (Monthly Recurring Revenue)
Revenue recognized for recurring services rendered in a given month (does not include one-time, or
non-recurring, revenue such as fees and professional services revenue)
MRR CMGR
(Compound Monthly Growth Rate)
Implied compounded monthly MRR growth rate between two disparate months [CMGR = (latest month
MRR / first month MRR) ^ (1 / # of months) -1]
GROSS USER CHURN Total lost customers (cancelled subscriptions) in a given period / prior period total customers
PAID CAC
Cost per customer acquired through paid marketing channels (total sales and marketing spend in a given
month / total customers acquired via paid channels, including via sales, in a given month)
13
SUBSCRIPTION
(cont’d)](https://image.slidesharecdn.com/anuhariharan-ninebusinessmodelsandthemetricsyoushouldtrack-converted-200818100924/85/Nine-business-models-and-the-metrics-you-should-track-converted-13-320.jpg)
![METRIC DEFINITION
GMV (Gross Merchandise Value) Total sales dollar volume of merchandise transacted in a given period
NET REVENUE The portion of GMV that the company recognizes as revenue for services rendered
NET REVENUE CMGR
(Compound Monthly Growth Rate)
Implied compounded monthly net revenue growth rate between two disparate months [CMGR = (latest
month net revenue / first month net revenue) ^ (1 / # of months) -1]
USER RETENTION Percent of customers who go on to make at least one purchase in month 2 (note: this is a cohort metric)
PAID CAC
Cost per customer acquired through paid marketing channels (total sales and marketing spend in a given
month / total customers acquired via paid channels, including via sales, in a given month)
19
MARKETPLACE
(cont’d)](https://image.slidesharecdn.com/anuhariharan-ninebusinessmodelsandthemetricsyoushouldtrack-converted-200818100924/85/Nine-business-models-and-the-metrics-you-should-track-converted-19-320.jpg)
![METRIC DEFINITION
MONTHLY REVENUE Total revenue in a given month
REVENUE CMGR
(Compound Monthly Growth Rate)
Implied compounded monthly revenue growth rate between two disparate months [CMGR = (latest month
revenue / first month revenue) ^ (1 / # of months) -1]
GROSS MARGIN
Gross profit in a given month / total revenue in the same month (gross profit equals total revenue less cost
of sales and goods sold)
PAID CAC
Cost per customer acquired through paid marketing channels (total sales and marketing spend in a given
month / total customers acquired via paid channels, including via sales, in a given month)
22
E-COMMERCE
(cont’d)](https://image.slidesharecdn.com/anuhariharan-ninebusinessmodelsandthemetricsyoushouldtrack-converted-200818100924/85/Nine-business-models-and-the-metrics-you-should-track-converted-22-320.jpg)
![METRIC DEFINITION
MONTHLY REVENUE Total revenue in a given month
REVENUE CMGR
(Compound Monthly Growth Rate)
Implied compounded monthly revenue growth rate between two disparate months [CMGR = (latest month
revenue / first month revenue) ^ (1 / # of months) -1]
GROSS MARGIN
Gross profit in a given month / total revenue in the same month (gross profit equals total revenue less cost
of sales and goods sold)
PAID CAC
Cost per customer acquired through paid marketing channels (total sales & marketing spend in a given
month / total customers acquired via paid channels, including via sales, in a given month)
28
HARDWARE
(cont’d)](https://image.slidesharecdn.com/anuhariharan-ninebusinessmodelsandthemetricsyoushouldtrack-converted-200818100924/85/Nine-business-models-and-the-metrics-you-should-track-converted-28-320.jpg)
Nine business models and the metrics you should track-converted
- 1. METRICS: Why should you track them? 1 ● Important gauge of your business ● Fix things that are broken sooner rather than later ● Understand your customer ● Useful for benchmarking against competitors ● Critical for fundraising
- 2. VERTICA LS Nine “verticals” based on common business models, not industry... ENTERPRISE SAAS USAGE-BASED SUBSCRIPTION TRANSACTIONAL MARKETPLACE E-COMMERCE ADVERTISING HARDWARE 2
- 3. ENTERPRI SE 3 An enterprise company sells services or software to other businesses on a single-license basis. These contracts have fixed terms, designated contract values, and come up for renewal at the end of the term. Examples: Docker, Cloudera, FireEye
- 4. ENTERPRISE (cont’d) 4 METRIC DEFINITION BOOKINGS Sum of value of all customer contracts (note: letters of intent and verbal agreements ≠ bookings) TOTAL CUSTOMERS Total number of unique contracted customers today REVENUE Revenue is recognized when the service is actually provided or ratably over the life of the agreement
- 5. ENTERPRISE (cont’d) 5 Common mistakes ● Don’t use Bookings and Revenue, or Bookings and ACV (Annual Contract Value), interchangeably ● Don’t include letters of intent (LOIs) and verbal agreements in bookings → they are NOT yet bookings!
- 6. SAA S 6 A SaaS (software-as-a-service) company sells subscription- based licenses for a cloud-hosted software solution. Examples: Segment, Ironclad, Sendbird
- 7. METRIC DEFINITION MRR (Monthly Recurring Revenue) Revenue recognized for recurring services rendered in a given month (does not include one-time, or non-recurring, revenue such as fees and professional services revenue) ARR (Annual Recurring Revenue) Measure of revenue components that are recurring in nature on an annual basis (ARR = MRR * 12) GROSS MRR CHURN Monthly recurring revenue lost in a given month / monthly recurring revenue at the beginning of the month PAID CAC Cost per customer acquired through paid marketing channels (total sales and marketing spend in a given month / total customers acquired via paid channels, including via sales, in a given month) 7 SAAS (cont’d)
- 8. SAAS (cont’d) 8 Common mistakes ● Don’t use Annual Recurring Revenue (ARR) and Annual Revenue Run-Rate interchangeably ○ Multiplying one month’s all-in revenue by 12 = Annual Run-Rate, not Annual Recurring Revenue ● Don’t include one-time or non-recurring revenue such as fees and professional services revenue in your monthly recurring revenue (MRR) calculation → only include recurring revenue
- 9. USAGE- BASED 9 A usage-based company prices their service based on a customer’s usage over a given period, denominated by what the company’s service is (e.g., $ per API call) Examples: Twilio, Checkr, Lob
- 10. METRIC DEFINITION MONTHLY REVENUE Total Revenue recognized for services rendered in a given month REVENUE CMGR (Compound Monthly Growth Rate) Implied compounded monthly revenue growth rate between two disparate months [CMGR = (latest month revenue / first month revenue) ^ (1 / # of months) -1] REVENUE RETENTION Total revenue from customers in the current month who were also customers in the previous month/ total revenue from all customers in the prior month. Also often looked at on an annual basis GROSS MARGIN Gross profit in a given month / total revenue in the same month (gross profit equals total revenue less cost of sales and goods sold) 10 USAGE-BASED (cont’d)
- 11. USAGE-BASED (cont’d) 11 Common mistakes ● Referring to usage-based revenue as recurring revenue. Usage-based revenue is dependent on volume and is not recurring in nature. Do not use the terms interchangeably
- 12. SUBSCRIPTI ON 12 A subscription company sells a product or service, usually to a consumer, on a recurringbasis. Examples: The Athletic, Dollar Shave Club, BlueApron
- 13. METRIC DEFINITION MRR (Monthly Recurring Revenue) Revenue recognized for recurring services rendered in a given month (does not include one-time, or non-recurring, revenue such as fees and professional services revenue) MRR CMGR (Compound Monthly Growth Rate) Implied compounded monthly MRR growth rate between two disparate months [CMGR = (latest month MRR / first month MRR) ^ (1 / # of months) -1] GROSS USER CHURN Total lost customers (cancelled subscriptions) in a given period / prior period total customers PAID CAC Cost per customer acquired through paid marketing channels (total sales and marketing spend in a given month / total customers acquired via paid channels, including via sales, in a given month) 13 SUBSCRIPTION (cont’d)
- 14. SUBSCRIPTION (cont’d) 14 Common mistakes ● Don’t measure CMGR as a simple average of discrete monthly growth rates → use right CMGR formula!
- 15. TRANSACTIO NAL 15 A transactional company enables a financial transaction on behalf of a customer and collects a fee (usually a percent of the underlying transaction). Examples: Stripe, PayPal, Coinbase, Brex
- 16. METRIC DEFINITION GROSS TRANSACTION VOLUME Total sales or payment dollar volume transacted in a given period NET REVENUE The portion of GTV that the company recognizes as revenue for services rendered USER RETENTION Percent of customers who go on to make at least one purchase in month 2 (note: this is a cohort metric) PAID CAC Cost per customer acquired through paid marketing channels (total sales and marketing spend in a given month / total customers acquired via paid channels, including via sales, in a given month) 16 TRANSACTIONAL (cont’d)
- 17. TRANSACTIONAL (cont’d) 17 Common mistakes ● Gross Transaction Volume and Revenue are NOT the same thing → revenue = the $’s you keep! ● User retention is a cohort* metric, meaning it is re-calculated to include each new cohort acquired *Cohort = a group of customers acquired within a given period (usually a 28-day “month”) *Retention can be calculated on a month 2, month 6, or month 12 basis (depending on your business model)
- 18. MARKETPL ACE 18 A marketplace company acts as an intermediary in the sale of a good or service between sellers and buyers, generally collecting a percent of the total transaction value. Examples: Airbnb, eBay
- 19. METRIC DEFINITION GMV (Gross Merchandise Value) Total sales dollar volume of merchandise transacted in a given period NET REVENUE The portion of GMV that the company recognizes as revenue for services rendered NET REVENUE CMGR (Compound Monthly Growth Rate) Implied compounded monthly net revenue growth rate between two disparate months [CMGR = (latest month net revenue / first month net revenue) ^ (1 / # of months) -1] USER RETENTION Percent of customers who go on to make at least one purchase in month 2 (note: this is a cohort metric) PAID CAC Cost per customer acquired through paid marketing channels (total sales and marketing spend in a given month / total customers acquired via paid channels, including via sales, in a given month) 19 MARKETPLACE (cont’d)
- 20. MARKETPLACE (cont’d) 20 Common mistakes ● Paid CAC: failing to include all costs associated w/ user acquisition such as referral incentives, discounts, credits, etc.
- 21. E- COMMERC E 21 An e-commerce company sells physical goods online. Generally, e-commerce companies manufacture and inventory those goods. Examples: Warby Parker, Bonobos, Memebox
- 22. METRIC DEFINITION MONTHLY REVENUE Total revenue in a given month REVENUE CMGR (Compound Monthly Growth Rate) Implied compounded monthly revenue growth rate between two disparate months [CMGR = (latest month revenue / first month revenue) ^ (1 / # of months) -1] GROSS MARGIN Gross profit in a given month / total revenue in the same month (gross profit equals total revenue less cost of sales and goods sold) PAID CAC Cost per customer acquired through paid marketing channels (total sales and marketing spend in a given month / total customers acquired via paid channels, including via sales, in a given month) 22 E-COMMERCE (cont’d)
- 23. E-COMMERCE (cont’d) 23 Common mistake ● Gross profit: not breaking down all costs included and those excluded in gross profit calculations
- 24. ADVERTISI NG 24 An advertising company offers a free service to consumers and derives revenue entirely, or predominantly, from advertisers. Common advertising companies include social networks and content sites. Examples: Snapchat, Twitter, Reddit
- 25. ADVERTISING (cont’d) 25 METRIC DEFINITION DAILY ACTIVE USERS (DAU) Total number of unique users active in a 24-hour day, averaged over a given period of time MONTHLY ACTIVE USERS (MAU) Total number of unique users active at least once in last 28-days PERCENT LOGGED-IN Total monthly active users with a registered account (“logged-in”) divided by the total unique visitors (inclusive of both “logged-in” and “logged-out”) during the same 28-day window
- 26. ADVERTISING (cont’d) 26 Common mistake ● Not defining what “active” means in the context of your business
- 27. HARDWA RE 27 A hardware company sells physical devices to consumers or businesses Examples: Fitbit, GoPro, Xiaomi
- 28. METRIC DEFINITION MONTHLY REVENUE Total revenue in a given month REVENUE CMGR (Compound Monthly Growth Rate) Implied compounded monthly revenue growth rate between two disparate months [CMGR = (latest month revenue / first month revenue) ^ (1 / # of months) -1] GROSS MARGIN Gross profit in a given month / total revenue in the same month (gross profit equals total revenue less cost of sales and goods sold) PAID CAC Cost per customer acquired through paid marketing channels (total sales & marketing spend in a given month / total customers acquired via paid channels, including via sales, in a given month) 28 HARDWARE (cont’d)
- 29. Common mistakes ● Cumulative charts ● Not labeling Y-axis ● Changing Y-axis scale ● Showing only % gains PRESENTING METRICS Solutions ● Monthly data ● Label with the right detail ● X and Y axes intersect at zero ● Show absolute number and % More information on Metrics (1) https://a16z.com/2015/08/21/16-metrics/ (2) https://a16z.com/2015/09/23/16-more-metrics/