One of my favorite CEOs likes to tell me a metric is only useful if it answers an important question.

Earlier in the week we reviewed how to build a simple product roadmap. Today I want to outline the metrics I’ve found to be most useful in board meetings. They answer the question how should you be measuring your business at the highest level. You should have many more metrics than these, but I’ve highlighted the ones that you should present to your board and you should review every week.

Metrics Format

Great data leads to helpful conversations. I’ve found the following format works best to drive the board to focus on the right questions. I suggest presenting three slides, one for each category (Distribution, Engagement, Revenue) in the following format as the first set of slides in your board deck:

Metric This month Last Month % change TSM Average Goal
Active Users 100,000 50,000 100% 125% 75%
Total User Base 500,000 400,000 25% 7% 10%

The one column you may not recognize is TSM Average which stands for Trailing Six Month Average. It is calculated in this way: (ending_value/starting_value)^(1/num_periods-1)-1.

In most businesses, a monthly growth percent is too volatile to be meaningful. However a TSM Average smooths out the monthly average into a rolling average. Comparing the monthly to the TSM, I can get a sense of whether the monthly growth is accelerating or decelerating and how it compares to the goal you set each quarter. In this example, the total user growth was slower this month than in the past six month, but activity is way up. The next question, the one board members should ask, is why?

Metrics/Question Pairs

Now that we have the base format of the metrics, let’s talk about which metrics matter. Each metric is followed by the question it’s designed to answer. Pick the ones that are relevant to your business.


  • New users added last month by channel/TSM growth rate: How are well are we growing the user base? Which user sources are the best?
  • Total user base/TSM growth rate: How important is our monthly growth compared to our total user base?
  • Cost of customer acquisition, lifetime value, pay back period: Can we grow faster through paid acquisition? Are we acquiring customers profitably? How much can we afford to spend on new customers? How is this changing over time?


  • Active users (can defined in several different ways depending on your product) by channel/TSM growth rate: Are we getting better at giving our customers what they want/need? Which channels of users are most effective in finding us the right kind of user?
  • % of users using top 3 key features in a given month: Are our product initiatives the right ones?


  • Revenue / TSM Revenue growth: Are we growing our revenue?
  • Conversion to paid rate in that month/by cohort: How many users converted to paid? Are we improving our ability to convert customers to paid?
  • Avg spend per paying customer of a managed account vs solo account: What is the impact of the account management team?
  • Churn rate/ TSM Churn rate: How well do we retain our customers?
  • Burn rate: When are we profitable? When do we run out of cash? When do we need to raise?

These are the metrics that have been most valuable/insightful for me working with our companies. Let me know if there are other metrics you use to measure your business that might be useful to add to this list. This list is most useful for e-commerce/freemium businesses.


5 thoughts on “Your Startup’s 10 Most Important Metrics.

  1. Relating the idea of knowing the question(s) you want to answer to the discussion on the last post re: engagement & retention: if you’re continuously changing your product, you need to be answering the question “Did feature x positively impact distribution/engagement/monetization?” – and your instrumentation needs to support answering this question for every release.

    The discussion on where to categorize engagement is connected to understanding the question you’re trying to answer. What if your question is “did feature x impact 30 day retention?” This is a tricky question because although 30 day retention is an important metric, you won’t know the full impact of the change you released today until 30 days from now! You can wait 30 days and look back on it, but how many other changes have been made in the the same time period? I’ve found it to be extremely hard to correlate changes in retention with specific product changes. Cohort analysis and split testing can help with this but keeping users bucketed into different experiences for 30 days is more overhead than most early stage startups can handle.

    What I’ve found is that engagement is usually a leading indicator for retention. This is important for startups that are moving fast, because if you’re measuring engagement in terms of DAU/MAU, you’ll know immediately if your release is moving the needle on engagement. You need to do your homework and validate that more engaged users do in fact retain longer than less engaged users for your particular product, but if you validate this, then you have a strong product design thesis that you can use to focus your team. At a strategic level, you may know that increasing 30 day retention is critical for your business, but what you want to focus your team on is testing and experimenting to find features that move the needle on engagement, because focusing on engagement allows faster learning & quicker feedback loops.

    I really like Josh Elman’s User Accounting model (see slide 24 here: http://www.slideshare.net/joshelman/thoughts-on-growth). It combines some aspects of distribution + engagement into one calculation that makes a lot of sense for social products.

    • Thanks, Alan. You have some really insightful points here. I agree engagement is a leading indicator of retention. That’s a powerful statement.

      And there is complexity in correlating features to engagement. Most features only have 10% or fewer of the user base using them. I think it’s important to focus on the top 3 key features of the business and understand how they might drive engagement. The measure will never be clean but it can be used directionally.

      Thanks for the link to Josh’s deck. It’s hard to follow without the voice over but the user accounting makes a lot of sense.

  2. Great list of value metrics to look at. My only concern is that all the above metrics are purely quantitative and miss out on the Voice of the Customer (qualitative element).

    We can all agree that the most successful companies today have loyal and vocal user bases for which the user experience goes beyond problem-solving through features.

    That qualitative perception should be measured as regularly as all the other stuff. So I’d add to the list a voice of customer metric. Common ones include:

    Task completion rate – Do our customers agree we’re getting better at satisfying their needs? (we think we are but do THEY think we are)

    Net promoter score – Are customers likely to recommend us to others?

    Sean Ellis test – Would customers be genuinely disappointed if our product ceased to exist?

    With tools like KISSinsights and Mailchimp this sort of measurement becomes so easy and accessible that even pre-revenue startups should do it.

    • Agreed. Qualitative tests are important. They are harder to measure but tools like KissMetrics help provide an ongoing baseline for these metrics. They can be good predictors of engagement and retentiont.

      Thanks, Carmen.

  3. Pingback: Your startup’s board deck | ex post facto

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