Tue, 25 January 2022
Metrics for a Downturn Economy
Hello, this is Hall T. Martin with the Startup Funding Espresso -- your daily shot of startup funding and investing.
In a downturn economy, metrics can help you make decisions about your business.
Here are some key metrics to consider:
Net burn rate - measures the actual cash lost in a single month.
To calculate, subtract the total revenue from the total amount of money spent month over month.
Use this to measure your cash runway by dividing the cash in the bank by net burn rate to tell you how many months you have left.
Rule of 40 - measures the growth rate and profitability and indicates chances of the business surviving.
To calculate, take the profit margin in percentage and growth rate in percentage and add together.
A result of 40% and above indicates a healthy business.
Margins - measures the profitability of the business after sales and after operating expenses.
To calculate gross margins, take net sales and subtract the cost of goods sold and divide by net sales.
Gross margins above 40% are considered healthy.
To calculate EBITDA margins, take net sales and subtract cost of goods sold and operating expenses and divide by net sales.
EBITDA margins above 10% are considered healthy.
User segmentation - shows the growth rate and churn rate for each segment of users.
Use this metric to better focus your sales efforts in a downturn.
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