Financial Metrics for the Startup Phase
1. Budget to actual spend. The business in the phase needs to establish a budget on how it is going to spend the funds invested or raised for the timeline the owners have established for this phase.
2. Revenue – this includes not just top line revenue but also measuring monthly recurring revenue. How much revenue is needed to make this business profitable and how much revenue and revenue growth is needed to reach the point to where this enough revenue to cover costs?
3. Burn rate – how much cash am I spending each month
4. Cash runway – the length of time which a company can remain solvent. Answers the question… how long can we operate with the cash we have? Calculation (cash/burn rate)
5. Customer acquisition costs – how much does it cost to acquire a customer?
6. Customer lifetime value - what revenue will be generated from each new customer? If recurring, monthly recurring revenue churn (amount lost due to cancellations, returns or bad debt) is part of the calculation
7. Recovery time – how long does it take for us to recover the cost of acquisition?
8. Gross margin – revenue less cost of goods/services sold – this margin needs to be high enough to cover administrative or overhead costs for the company to be profitable
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