Common Key Metrics

Why This Matters

In the Business Model Canvas, key metrics aren't just numbers—they're the vital signs that tell you whether your business model is actually working. You're being tested on your ability to connect these metrics to strategic decision-making: customer acquisition efficiency, retention health, revenue predictability, and overall financial sustainability. Understanding how metrics interact with each other (like how CAC relates to CLV) demonstrates the systems thinking that separates strong business analysis from surface-level memorization.

Don't just memorize formulas and definitions. Know what each metric reveals about a business model's strengths and weaknesses, when to prioritize one metric over another, and how changes in one metric ripple through the entire canvas. If you can explain why a high churn rate undermines even impressive acquisition numbers, you're thinking like a strategist.

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Customer Economics Metrics

These metrics answer the fundamental question: Are your customers worth more than they cost to acquire? The relationship between acquisition costs and lifetime value determines whether growth is sustainable or a path to bankruptcy.

Customer Acquisition Cost (CAC)

• Total cost to acquire one new customer—includes all marketing, sales, and onboarding expenses divided by new customers gained
• Efficiency indicator that reveals how well your acquisition channels convert spending into actual customers
• Must be analyzed alongside CLV; a high CAC is only problematic if it exceeds the value customers generate

Customer Lifetime Value (CLV)

• Predicted total revenue from a customer over their entire relationship with your business
• Justifies acquisition spending—a CLV of $500$ makes a $100$ CAC reasonable, while a $50$ CLV makes it catastrophic
• Drives segmentation strategy by identifying which customer types deserve premium acquisition investment

Average Revenue Per User (ARPU)

• Revenue generated per customer over a specific period, typically monthly or annually
• Measures monetization effectiveness—higher ARPU often signals successful upselling, cross-selling, or premium pricing
• Benchmarking tool for comparing your business against industry standards and competitors

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Retention & Loyalty Metrics

Customer acquisition means nothing if customers leave faster than you can replace them. These metrics measure the "leaky bucket" problem—how well you're keeping the customers you've already won.

Churn Rate

• Percentage of customers lost over a specific period, typically measured monthly or annually
• Revenue forecasting essential—even small increases in churn compound dramatically over time
• Diagnostic tool that signals product-market fit problems, service issues, or competitive pressure

Net Promoter Score (NPS)

• Customer loyalty measurement based on one question: "How likely are you to recommend us?" (scale of 0-10)
• Predicts organic growth—promoters (9-10) drive referrals while detractors (0-6) damage reputation
• Leading indicator that often reveals satisfaction problems before they show up in churn data

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Revenue & Growth Metrics

These metrics track the financial engine of your business model. For subscription businesses especially, predictable revenue changes everything about how you plan, invest, and scale.

Monthly Recurring Revenue (MRR)

• Predictable subscription revenue normalized to a monthly figure for consistent tracking
• Financial health indicator for subscription-based models—shows stability and growth trajectory
• Forecasting foundation that enables confident cash flow planning and investment decisions

Conversion Rate

• Percentage of prospects who take a desired action—purchase, signup, download, or other key behavior
• Funnel efficiency measure that reveals where your sales process succeeds or loses potential customers
• Directly impacts CAC—improving conversion rates is often cheaper than increasing marketing spend

Gross Margin

• Revenue minus cost of goods sold, expressed as a percentage: $\frac{\text{Revenue} - \text{COGS}}{\text{Revenue}} \times 100$
• Profitability foundation—higher margins mean more resources available for growth, R&D, and operations
• Business model viability test—some models require high volume with thin margins, others demand premium pricing

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Financial Sustainability Metrics

These metrics answer the investor's core questions: Is this business using resources wisely? How long can it survive? Is growth actually profitable?

Burn Rate

• Monthly cash consumption before reaching profitability—critical for startups and growth-stage companies
• Runway calculator—divide remaining capital by burn rate to know how many months you can operate
• Strategic constraint that influences decisions about hiring, marketing spend, and scaling pace

Return on Investment (ROI)

• Profitability relative to cost, calculated as: $\frac{\text{Net Profit}}{\text{Investment Cost}} \times 100$
• Resource allocation guide—compare ROI across initiatives to prioritize highest-impact investments
• Campaign evaluation tool that determines whether marketing, product, or operational investments paid off

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Quick Reference Table

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Self-Check Questions

1. Which two metrics must be analyzed together to determine whether customer acquisition spending is sustainable, and what ratio should you aim for?

2. A SaaS company has strong conversion rates but declining MRR. Which metric would you examine first to diagnose the problem, and why?

3. Compare and contrast NPS and Churn Rate: How do they differ in what they measure, and why might a business have a high NPS but still experience significant churn?

4. If an investor asks about your startup's runway, which two metrics would you need to calculate the answer, and what does that calculation reveal?

5. A business wants to increase CLV without acquiring new customers. Which three strategies could achieve this, and which metrics would you track to measure success?