Product management. Metrics and examples

 

Business Metrics focused on startups: A Comprehensive Guide to Measuring Growth and Success for a Product manager 

For startups, tracking the right metrics is critical for measuring financial performance, customer acquisition, retention, and market potential. These key indicators help founders, investors, and executives make informed decisions, optimize business strategies, and drive sustainable growth. While some metrics are universal, their application varies across industries. This guide provides a detailed breakdown of essential startup metrics, with diverse examples from SaaS, healthcare, pharma, automotive, fintech, e-learning, and more.

Revenue Metrics: Understanding Financial Performance

1. Monthly Recurring Revenue (MRR)

The total revenue generated from paid customer subscriptions each month.

  • Example 1 (SaaS): A cloud-based project management platform earns $50,000 monthly from subscriptions.
  • Example 2 (Healthcare): A telemedicine platform generates $30,000 per month from online doctor consultations.
  • Example 3 (Fitness): A gym membership app collects $20,000 monthly from recurring subscriber fees.

2. Annual Recurring Revenue (ARR)

MRR projected over a year to measure long-term revenue potential.

  • Example 1 (E-learning): An online course platform with $10,000 MRR projects an ARR of $120,000.
  • Example 2 (Automotive): A connected car service offering GPS tracking and diagnostics for $200 per year achieves an ARR of $2 million from 10,000 customers.
  • Example 3 (Streaming): A music streaming service with $100,000 MRR forecasts an ARR of $1.2 million.

3. Average Revenue Per Account (ARPA)

Formula: MRR ÷ Total Number of Customers — this measures the average revenue per user.

  • Example 1 (Telecom): A mobile carrier with $500,000 MRR and 10,000 subscribers has an ARPA of $50.
  • Example 2 (Pharma): A B2B pharmaceutical supplier with $1 million MRR and 500 hospitals has an ARPA of $2,000.
  • Example 3 (Retail): A beauty subscription box company with $30,000 MRR and 1,000 subscribers has an ARPA of $30.

4. Total Contract Value (TCV)

The total revenue expected from a contract, including one-time and recurring charges.

  • Example 1 (Enterprise Software): A CRM company signs a 3-year contract worth $300,000, including onboarding fees.
  • Example 2 (Construction): A real estate developer secures a $1 million project with milestone-based payments.
  • Example 3 (Automotive): A fleet management company signs a 5-year, $5 million contract with a logistics provider.

5. Annual Contract Value (ACV)

The average annual revenue generated per contract.
Formula: TCV ÷ Contract Length (in years)

  • Example 1 (Cloud Services): A cloud storage provider signs a 4-year, $400,000 contract, resulting in an ACV of $100,000.
  • Example 2 (Healthcare Equipment): A hospital signs a 3-year, $900,000 contract for MRI machine servicing, yielding an ACV of $300,000.
  • Example 3 (Consulting): A management consulting firm secures a 2-year, $240,000 contract, with an ACV of $120,000.

6. Lifetime Value (LTV)

An estimate of the net profit generated from a customer over their entire relationship with the company.
Formula: ARPA × Average Customer Lifetime × Gross Margin %

  • Example 1 (E-commerce): A skincare brand estimates an LTV of $1,500 per repeat customer.
  • Example 2 (Healthcare): A dental clinic calculates an LTV of $5,000 per patient over 10 years.
  • Example 3 (Pharma): A provider of chronic medication estimates an LTV of $10,000 per long-term patient.

7. Deferred Revenue

Revenue received in advance but not yet earned.

  • Example 1 (Software): A cybersecurity firm collects $240,000 for a 12-month subscription but recognizes $20,000 monthly.
  • Example 2 (Healthcare): A diagnostic lab sells annual health test packages but recognizes revenue only when tests are conducted.
  • Example 3 (Publishing): A magazine publisher receives $500,000 from annual subscriptions but recognizes revenue monthly.

8. Billings

The sum of current quarter revenue + deferred revenue from the previous quarter, providing insight into cash flow.

  • Example 1 (Tech): A SaaS company bills $500,000 in Q1, including $100,000 deferred from Q4.
  • Example 2 (Healthcare): A medical insurance provider bills $2 million in Q2, including $500,000 deferred from Q1.
  • Example 3 (Education): An online university bills $1 million in Q3, including $200,000 deferred from Q2.

Market and Projection Metrics: Evaluating Growth Potential

9. Total Addressable Market (TAM)

The overall revenue opportunity available in an industry.

  • Example 1 (E-commerce): An online fashion retailer estimates a TAM of $500 billion globally.
  • Example 2 (Healthcare): A telemedicine provider identifies a TAM of $250 billion.
  • Example 3 (Pharma): A biotech startup developing new drugs targets a TAM of $150 billion.

10. MRR Projection

A forecast of current MRR projected into the future, annualized to estimate long-term revenue trends.

  • Example 1 (SaaS): A CRM company projects its $100,000 MRR to grow to $1.2 million ARR in a year.
  • Example 2 (Streaming): A video platform forecasts its $50,000 MRR to reach $600,000 ARR.
  • Example 3 (Healthcare): A medical imaging AI startup expects its $40,000 MRR to grow to $500,000 ARR.

Conclusion: Why Tracking Startup Metrics Matters

Understanding and monitoring these startup metrics is essential for business success. They help founders, investors, and executives measure performance, identify risks, and optimize strategies. While some metrics, like MRR, CAC, and LTV, are universal, their application varies across industries such as tech, healthcare, pharma, fintech, e-learning, automotive, and retail.

By tracking these key indicators, startups can make data-driven decisions, improve customer retention, enhance financial stability, and achieve sustainable growth. Whether you're building a subscription-based SaaS product, a healthcare service, or a direct-to-consumer brand, mastering these metrics will give you the insights needed to scale effectively and attract investors.

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Author:  Dr M Khalid Munir, a Product Management professional working for the healthcare solutions industry for about two decades. email: khalid345 (at) g m a i l (dot) com

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