When you’re running a startup, every decision counts. You don’t have the luxury of wasting time or money. That’s why tracking the right KPIs (Key Performance Indicators) from day one can make all the difference.
But here’s the mistake most founders make → they track too many numbers. Website traffic, social likes, random downloads… and end up drowning in data that doesn’t matter.
The truth is: you only need a handful of KPIs to know if your business is on track. Let’s go through the 7 most important KPIs every startup should focus on.
1. Customer Acquisition Cost (CAC)
This tells you how much it costs to acquire one customer.
Formula:
CAC = Total Sales & Marketing Spend ÷ Number of New Customers
👉 Why it matters: If your CAC is higher than what you earn from a customer, your startup won’t survive.
💡 Pro tip: Keep experimenting with cheaper channels (like referrals) to bring CAC down.
2. Customer Lifetime Value (CLV or LTV)
This measures how much revenue you can expect from a customer over the entire relationship.
👉 Why it matters: If your LTV is not at least 3x your CAC, your business model is risky.
💡 Example: If it costs you ₹1,000 to acquire a customer, that customer should bring in at least ₹3,000 in revenue.
3. Monthly Recurring Revenue (MRR)
If you’re in SaaS or subscription-based business, this is the lifeline.
👉 Why it matters: MRR shows predictable income, helping you forecast growth and manage cash flow.
💡 Pro tip: Break it down into:
- New MRR (new customers)
- Expansion MRR (upgrades/cross-sells)
- Churned MRR (lost customers)
4. Churn Rate
This is the percentage of customers who stop using your product or service over a period.
Formula:
Churn Rate = (Customers Lost ÷ Total Customers at Start) × 100
👉 Why it matters: High churn = leaking bucket. Even if you add new customers, you’re still losing ground.
💡 Pro tip: Talk to churned customers. Feedback here is gold.
5. Burn Rate
Startups live and die by cash. Burn rate tells you how fast you’re spending money each month.
👉 Why it matters: It determines your runway (how many months before you run out of cash).
💡 Example: If you spend ₹10 lakh a month and have ₹1 crore in the bank, your runway is 10 months.
6. Conversion Rate
This shows how well you’re turning leads into paying customers.
Formula:
Conversion Rate = (Number of Conversions ÷ Total Leads) × 100
👉 Why it matters: More conversions at the same ad spend = faster growth.
💡 Pro tip: Optimize your landing pages, demo calls, and sales pitches regularly.
7. Net Promoter Score (NPS)
This measures customer satisfaction and loyalty. Usually collected through a simple question:
“How likely are you to recommend us to a friend?”
👉 Why it matters: Happy customers = free marketing. Word of mouth is the cheapest growth channel.
💡 Pro tip: Always follow up with detractors (those who give low scores). Fix their issues.
Bonus KPI: North Star Metric
Every startup should define one North Star Metric (NSM) → the single KPI that reflects the value you deliver to customers.
Examples:
- For Uber → number of rides completed
- For Netflix → hours watched
- For Airbnb → nights booked
👉 Why it matters: It keeps the whole team focused on the same ultimate goal.
Conclusion
Tracking every metric is tempting, but it only creates noise. Startups should stick to the essentials:
- CAC
- LTV
- MRR
- Churn Rate
- Burn Rate
- Conversion Rate
- NPS
These seven KPIs will give you a clear picture of whether your business is healthy and growing.
🚀 Action Step: Sit down with your team this week. Define these KPIs, set targets, and review them every month. That way, you’ll know if your startup is heading in the right direction—or if you need to pivot fast.
