Founders and Customers: Love and Service - 16 Startup Metrics

Founders and Customers: Love and Service - 16 Startup Metrics

In the world of startups, there are two key elements that contribute to success - founders who genuinely love their customers, and the use of effective metrics to measure the health and growth of the business. These two seemingly unrelated concepts are actually deeply intertwined and crucial for building a thriving company.

When founders truly love their customers, it creates a ripple effect throughout the entire organization. Customers feel a sense of loyalty and are more open to trying new products and features. They provide valuable feedback, both positive and negative, which helps the company improve. Satisfied customers also become advocates and share their positive experiences with others, leading to organic growth.

But how can you tell if founders truly love their customers? One clear indication is how they talk about them internally. Founders who have a genuine love for their customers know each one by name, understand why they use the product, and are aware of their long-term goals. These founders speak about their customers as if they were friends, not just clients. You can see the excitement on their faces when a specific customer comes up in conversation. This genuine love for customers motivates founders to overcome challenges and persevere in building something meaningful.

On the other hand, if founders do not care enough about their customers, they are more likely to run out of hope before they run out of money. Building a successful company requires a deep understanding and respect for the value that customers bring. Looking down on customers or considering them as mere sources of revenue is a recipe for failure.

Incorporating metrics into the equation is equally important. Metrics provide founders with valuable insights into how and why certain things are working (or not) in their business. They allow for data-driven decision making and help identify areas that need improvement or adjustment.

One important metric is the breakdown of total revenue. Investors highly value companies where the majority of revenue comes from product sales rather than services. Services revenue is non-recurring, has lower margins, and is less scalable. By focusing on product revenue, founders can build a more sustainable and scalable business model.

Another common mistake in metric calculation is estimating the lifetime value (LTV) of a customer. LTV should be calculated as the net profit of the customer over the entire relationship, not just the present value of revenue or gross margin. This provides a more accurate measure of the value that each customer brings to the business.

The contribution margin LTV to CAC (customer acquisition cost) ratio is also a useful metric for managing advertising and marketing spend. It helps determine the CAC payback period, informing whether the company's user acquisition budget is profitable or not. This metric allows founders to make informed decisions about scaling up their marketing efforts.

While cumulative charts may seem like a valid measure of growth, they can be misleading. A business can appear to be growing when, in reality, it is shrinking. Monthly revenue, new user acquisition, and other metrics that show ongoing activity provide a more accurate picture of a company's health and growth.

In conclusion, the love founders have for their customers and the use of effective metrics are both vital elements in building a successful startup. Founders who genuinely care about their customers are more likely to overcome challenges and create products that address deep needs. Metrics provide valuable insights and guide decision making, ensuring the business is on the right track. By combining these two elements, founders can set their company up for long-term success.

Actionable Advice:

• 1. Take the time to genuinely understand and love your customers. Get to know them by name, understand their goals, and treat them as friends rather than just clients.

• 2. Use accurate metrics to measure the health and growth of your business. Focus on product revenue, calculate LTV based on net profit, and track metrics that provide an accurate picture of growth.

• 3. Regularly analyze and adjust your advertising and marketing spend based on the contribution margin LTV to CAC ratio. This will help ensure your user acquisition budget is profitable and scalable.