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Dec 21, 2020, 07:19pm EST | 1,726 views

9 Basic Financial And

Analytics Metrics Every
Startup Founder Should
Know
Abdo Riani Senior Contributor
Entrepreneurs
I share tips about launching, validating and growing startups.

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A startup cannot sustain value creation if its most basic and key metrics don’t add up.
In this ... [+] GETTY

Everyone starting a new business understands the basic concept

of profits. If you are making more than you are spending, the
difference is your profit and the bigger the difference, the more
money you make. The most important question is, how do you
run a profitable business?

First and foremost, a profitable business sells a product that

people need, use and pay for. If you are starting a new venture,
this is probably all that you are thinking about, turning your
vision into reality by building a startup product that solves
customers’ problems and is worthy of their financial
commitment.

Secondly, an entrepreneur running a profitable business

understands the key financial and analytics metrics and how
they can influence profits. Those metrics are your key
performance indicators (KPI).

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In this post, you will find nine essential metrics that you should
know about and measure. Your KPIs can change as your startup
grows. For instance, when you launch your startup, new
registrations or activations can be an important KPI to evaluate
the validation of your startup idea and viability of the solution in
addressing your customers’ needs. As your startup grows, your
focus may expand to KPIs like customer acquisition cost,
lifetime value, and churn rate.

To see how these metrics can affect your startup's profitability

and valuation, run simple business calculations to measure how
your profits will increase or decrease with a change in each one
of the metrics below.

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1. Customer Lifetime Value

LTV or lifetime value of a customer is the revenue that a Build Enterprise Apps Fast
customer can generate for your startup over the lifetime of their Get Everything You Need to Build Enterprise
Apps Fast.
membership. In a subscription product, you can calculate LTV
OutSystems
by first determining the customer value by multiplying the
average purchase value by the purchase frequency. Multiply the
average customer value by the average period (in months or
Open
years) that the customer is retained.

If you know how much money you can make from a customer,
you will have a much clearer idea of how much money you
should invest in acquiring a new customer.

2. Customer Acquisition Cost

CAC or customer acquisition cost is the money that you spend

on acquiring a customer. When you launch your startup with a
new product and unknown brand, your CAC may be high, but as
you understand your ideal customer, find your best performing
marketing channel, and gain referrals through your early
adopters, your CAC can start declining. CAC includes your
expenditure on sales, marketing, and distribution activities.

3. Churn Rate

Churn rate indicates the percentage of your paying customers

that canceled their purchase. This is a metric that you should
aim to keep as low as possible.

4. Customer Retention

Customer retention is the opposite of churn rate. It indicates the

percentage of your paying customers that you retained, who ADVERTISEMENT

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5. Cash Flow BUSINESS STARTUP

3. ›
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Cash flow measures your costs versus revenue as it captures 4. ›
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money going in and out of your business. Positive or free cash
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flow indicates liquidity with more money flowing into the
business than out of it.

6. Return On Investment

ROI or return on investment is a metric for calculating the gains

or losses derived from an investment. To calculate your return
on investment in a new venture, project or initiative, divide your
profits or losses by your total investment and multiply the result
by 100 to get the ROI in percent.

7. Burn Rate

Burn rate means the amount of capital that a startup is spending

or “burning” to finance operation. The burn rate of a startup can
depend on the business model, funding and growth strategy.

8. Revenue ADVERTISEMENT

Revenue is the money that you generate through sales and is a

measure of startup performance. However, in many cases,
revenue is not an accurate measure of your company’s financial
health as it does not take into account business expenses.

9. Net Income

Your net income is the difference between your revenue and

expenses. Paying close attention to your customer’s lifetime
value, customer acquisition cost, churn rate, retention, cash
flow, return on investment and burn rate will help you increase
the difference between your revenue and expenses, thus run a
profitable startup venture while understanding the key metrics
that play a big role in boosting your company’s financial
performance.

If you are starting a new venture and believe that it is still early
to start thinking and projecting the metrics above, remember
that you could build a product that your customers love and still
fail. A startup cannot sustain value creation if its most basic and
key metrics don’t add up. At every stage of your venture, as
much as you are thinking about your product's value
proposition, think about the financial health of your startup.

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Abdo Riani is the founder and CEO of VisionX Partners, a startup

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Nov 18, 2020, 11:59am EST | 28,102 views

Empowering Women
Through Sustainable
Businesses
Japanese Visionary Women BRANDVOICE | Paid Program
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Japanese women pioneers working toward a more equitable

world

In the era following the Covid-19 pandemic, businesses

prioritizing social responsibility – rather than chasing profits –
may become the mainstream. In Uganda, NAKAMOTO Chizu,
who runs the handbag and accessory company RICCI
EVERYDAY, is supporting local women by using African prints
to produce handbags sold in Japan. NAKA Kotobuki, founder of
the company SANCHAI, set up a factory in a remote area of
Nepal to make peanut butter from locally grown heirloom
peanuts, stemming the tide of depopulation.

Nakamoto and Naka have established production systems in

Uganda and Nepal, creating local jobs and helping solve some of
the countries’ social problems. Even during the Covid-19
pandemic, both companies have kept their employees on staff
and have continued to pay them while on furlough.

JAPAN BRANDVOICE

Creating jobs that instill pride

NAKAMOTO Chizu was drawn to leadership and discovered the

joys of working with others at an early age.

“In high school, I watched a documentary about OGATA Sadako,

the first woman to lead the U.N. Refugee Agency. I admired the
way she went into the field and drew up policies with people –
rather than politics – in mind,” Nakamoto says.

In graduate school, she learned how businesses can create jobs

that help people gain confidence and lead better, more fulfilling
lives.

Later, she went to work for a non-governmental organization

supporting agriculture in Sub-Sahara Africa and was stationed
in Uganda in 2014. There, she encountered traditional African
prints for the first time at a local market. “I was completely
captivated by the flood of richly-patterned fabrics and bright
colors that adorned the walls,” she recalls.

The excitement she felt at seeing them gave her the idea to start
a business using the vividly colored prints make bags and
accessories that could be sold in Japan. Uganda, she reasoned,
was a cotton-producing country, and many people sew on a daily
basis. By launching a bag-making workshop, she’d be able to
create jobs. “Above all, I had a strong desire to involve the
women I met through my work at the NGO,” she says.

Apart from a small elite, many women – including single

mothers – have difficulties making ends meet, and reluctantly
borrow money from others.

She wanted the women to feel more empowered and sought to

engage them as collaborators, rather than mere employees.
Nakamoto has always respected the local culture and ways of
thinking, and she believes that being flexible has been the key to
the project’s success. “I’m just here to suggest an alternative way
of life. The women have the freedom to make their own choices,”
she says.

Instead of payment on a per-piece basis, workers receive fixed

salaries, which enables them to send their children to school.

“Stable employment helps them realize that they are needed,

which boosts their self-confidence. Now, these working women
glow with pride,” she says.

JAPAN BRANDVOICE

Finding fulfillment through work

NAKA Kotobuki has a taste for adventure. She was working for
an IT company when she visited the Himalaya region of Khotang
in Nepal for the first time. She had just started a charity project
to support education using the Internet of things and was
exploring the possibility of creating a system that would enable
the local people to become financially independent.

When she saw that the women in the rapidly depopulating area
spent all their time on childcare and chores, she wanted to work
with them to improve conditions. Due to the lack of industry,
men had no choice but to work elsewhere to earn money, and
there were no jobs available for women.

She decided to build a factory to create employment

opportunities for women. “That’s when I found peanuts, a local
crop prized by the people in the area. There were no
transportation networks, so the peanuts were not known
nationwide,” she says, explaining that the delicious nuts were
grown organically and had never undergone genetic
modification. Impressed with their quality, she came up with the
idea to make peanut butter and sell it in Japan. She was
convinced that once they built the factory and developed a viable
product, the concept could be expanded globally. The women
were already skilled at deskinning peanuts, so Naka started her
business with the aim of maximizing their potential.

“I thought that if I built a factory here, it would give the people

in Khotang the chance to lead a better life, and they’d be able to
have a greater sense of agency,” she says.

A little over a year later, she launched the factory, but no one
came to apply for a job. Undaunted, she went house to house,
explaining why the business was important. After she
communicated the significance of the factory, around 50 people
turned up for interviews and eight individuals were hired.

“For the women working there, this is basically their first job,
but now they’re able to act independently without a direct
supervisor” she says.

For Naka, the greatest happiness comes from seeing someone

lead a fulfilling life. The local people have gained a sense of
responsibility and the motivation to improve the company
together. SANCHAI’s story is one of personal transformation –
not only for Khotang, but also Naka herself – and has become a
means of connecting consumers and producers. It is a concrete
example of a sustainable business that has a real effect on
people’s lives.

“When I sell the peanut butter in Japan and relay the customers’
reactions to the workers, they shed tears of joy,” she says.

Weathering the pandemic as a small business

Despite huge challenges presented by the Covid-19 pandemic,

both women have fought to protect the lives of local people
while sustaining their businesses.

“It might be good that I don’t subscribe to a ‘bigger is better’

mindset,” Nakamoto says, explaining that her staff is limited to
around 35 members in Uganda and Japan. “When an
organization becomes too big, you end up with a division of
labor where everyone simply carries out their own tasks, and
that doesn’t lead to personal growth.”

During the lockdowns, they sold their products online and

managed to expand their customer base. Because RICCI
EVERYDAY is a small business where the employees are like
members of a family, the staff showed overwhelming support.

“Using this model, this kind of development is also possible in

other countries,” she says.

Like Nakamoto, Naka sees the benefits of keeping companies

small. Moreover, she believes that it’s more important for
businesses to build sustainable ecosystems than to pursue
profits.

“I have doubts about the pace of corporate growth. All around

the world, we are reaching the limits of capitalist growth. I don’t
think overexpansion is fair, and you can choose not to do it,” she
observes.

Nakamoto and Naka have created more than jobs: Their efforts
have inspired pride in local women and have enabled them to
feed their families and educate their children. Establishing
sustainable businesses that maximize human potential is end
goal. This is, perhaps, the real solution to society’s problems.

Made with vibrant African prints, RICCI EVERYDAY’s handbags and accessories have
attracted many fans. JAPAN BRANDVOICE

SANCHAI peanut butter with a woman working at the factory. Made with organically
grown heirloom peanuts, it delivers the natural goodness of pure peanut flavor. JAPAN

BRANDVOICE

To learn more about Women’s Empowerment, click here.

Japanese Visionary Women

Women are the blazing trails in society. Japan’s next generation of

pioneering women are stepping onto the international stage to create
new value and build a brighter,… Read More

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