🚫 The Vanity Metrics That Kill Startups

• App downloads → meaningless if users churn in a week

• Page views or impressions → irrelevant if nobody converts

• Top-line revenue → looks good but hides unprofitability

• Social followers → audience ≠ paying customers

✅ The Metrics That Actually Matter (How to Measure + Benchmarks)

1. CAC (Customer Acquisition Cost)

How much does it cost you to acquire one paying customer?
 Formula: CAC = Total Sales + Marketing Spend ÷ New Customers Acquired

👉 Example: Spend $10,000 to get 100 new customers = $100 CAC.

Benchmark: For SaaS, CAC should typically be < 1/3 of LTV.

2. LTV (Customer Lifetime Value)

How much revenue does a customer generate over their relationship with you?
 Formula: LTV = Average Revenue per Customer × Gross Margin × Average Lifespan

👉 Example: $100/mo × 70% margin × 20 months = $1,400.

Benchmark: Aim for LTV:CAC ratio of 3:1. Less = unprofitable. More = not investing enough in growth.

3. Retention / Churn

How well are you keeping customers after they sign up?
  Formulas:

• Churn = Customers Lost ÷ Customers at Start

• Retention = Customers End ÷ Customers Start

👉 Example: Start with 200, lose 20 → 10% churn, 90% retention.

Benchmark:

• SaaS → Monthly churn <5% (best-in-class <2%)

• Consumer apps → Annual retention >30–40% is solid

4. Payback Period

How long until you earn back your CAC?
 Formula: Payback = CAC ÷ Gross Margin per Customer per Month

👉 Example: CAC = $300. Margin = $70/mo. Payback = ~4.3 months.

Benchmark:

• SaaS → <12 months is healthy

• Enterprise SaaS → Often acceptable at 12–18 months

5. Runway

How much time do you have before running out of cash?
 Formula: Runway = Cash on Hand ÷ Monthly Net Burn

👉 Example: $120k in bank ÷ $20k burn = 6 months runway.

Benchmark: Always maintain 12–18 months runway to weather shifts or fundraising cycles.

📈 Secondary Metrics (As You Scale)

• Net Revenue Retention (NRR):
  Expansion + renewals – churn.
   Benchmark: >100% is good. 120%+ = top-tier SaaS.
  

• Gross Margins:
  Revenue – COGS ÷ Revenue.
   Benchmark:

  • SaaS → 70–85%

  • Marketplaces → 30–50%
    

• Sales Efficiency (Magic Number):
  Revenue growth from sales ÷ Sales & Marketing spend.
   Benchmark: A “magic number” of >1 means efficient sales spend. 0.5–1 = needs improvement.

⚡ The Result

When you measure the right metrics and know the benchmarks, you gain a survival advantage.

You’ll know if you can afford that next hire, whether you’re scaling profitably, and exactly how much oxygen your startup has left.

Final Thought:

Metrics aren’t just numbers. They’re your survival map.

The right ones keep you alive. The wrong ones get you killed.

So ask yourself: are you chasing the scoreboard that matters, or the one that flatters?

DON’T FORGET TO GET ROASTED!

👋 Got an idea you’re building and want a PMF gut check?

I’ll give you my honest take — no fluff, no pitch.

Let’s make sure you’re building the right thing, for the right market, in the right way.

– Patrick

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