Key Metrics: What Should You Actually Track?

Before any of that, a rule that precedes everything: a metric without a written definition quietly changes meaning every quarter. For each metric, specify exactly how it's calculated, from which data source, and who owns it.

1. Revenue metrics

Monthly recurring revenue. Derived from active contracts or subscriptions. Separate clearly between new revenue, expansion revenue from existing customers, and revenue lost to churn. That breakdown reveals the real source of your growth.

Average revenue per customer. A rise signals improved pricing or upsell; a fall may indicate drift toward a lower-value segment.

Revenue concentration. The largest customer's share of the total. High concentration is both an operational and a financial risk, and it is discounted at valuation.

2. Profitability metrics

Contribution margin. Revenue less the variable costs directly tied to serving the customer. This is the measure that determines whether the model is viable at all.

Gross margin. Enables broader comparison with the sector, but note: some companies push genuine operating costs below the margin line to flatter it.

3. Efficiency metrics

Customer acquisition cost (CAC). Total marketing and sales spend in a period ÷ new customers in that period.
The most familiar error: counting advertising only, excluding the salaries of the marketing and sales teams. The result is an optimistic number on which a bad scaling decision gets made.

Lifetime value (LTV). Monthly contribution margin × average months a customer stays. Calculate it on margin rather than revenue, or you inflate the value.

Payback period. How many months a customer needs to return what was spent acquiring them. This metric determines your growth rate, because it determines when capital returns to be reinvested in the next customer.

The rule: the direction matters more than the absolute figure. What counts is that these metrics improve over time, not that they match a benchmark imported from another market.

4. Survival metrics

Net burn and runway. Detailed in Cash Flow Management, and they are the metrics that precede every other warning.

5. Quality metrics

Retention / churn. Measure both by customers and by revenue — you can lose small customers and still grow revenue, or the reverse. Revenue churn is the more dangerous.

Net revenue retention. Measures revenue from the same customer cohort after a period, including upgrades, downgrades, and churn. Exceeding 100% means your base grows without new acquisition — the strongest signal of value there is.

6. What doesn't deserve dashboard space

Vanity metrics: downloads, signups, views, followers — unless tied to a proven path to revenue. Their presence feels reassuring and conceals the absence of real progress.

7. Review rhythm

• Weekly: cash, new sales, the core usage metric.
• Monthly: the full set, with variance analysis against plan.
• Quarterly: review the definitions themselves — is what we measure still what matters?

Common mistakes

• Too many metrics with no decision attached.
• Unwritten definitions that drift over time.
• Calculating CAC without salaries.
• Calculating LTV on revenue rather than margin.
• Measuring churn by customers only, ignoring revenue churn.
• Benchmarking against a different sector or a different market.
• Celebrating vanity metrics.

Checklist

• Four to six metrics selected, no more
• A written definition and data source for each
• A named owner for each metric
• New, expansion, and lost revenue separated
• Acquisition cost inclusive of salaries
• Lifetime value calculated on margin
• Retention measured by customers and by revenue
• Weekly, monthly, and quarterly review rhythm

FAQ

What is the most important metric at early stage?
Runway for survival, and retention to prove value. Everything else follows.

Are there benchmark ratios I must hit?
They vary widely by sector, model, and market. More useful is tracking the direction of your own metrics over time.

When should I start measuring?
From the first customer. Starting late means losing the baseline against which every improvement is measured.