Investor meeting – cheat sheet (2/2)

Top metrics to keep handy before meeting the investors

“The devil is in the details!” Putting together a set of key metrics which are most commonly  by the investors to gauge the performance of a business. Holistically it would be wise for a company to keep a track of the same (irrespective of the investors) to ensure business is on the right track. 

Diving right into the metrics:

1. Sales (or revenue or top-line) – the money that the product/services have been able to generate over a period of time.
   1. Monthly recurring revenue (monthly sales)
   2. Annual recurring revenue (annual sales)
2. Revenues streams (break-up of the revenue into sub-categories)
   1. Revenue by product type/segment
   2. Revenue by geography
3. Sales growth – trajectory indicating a development in the business (any early signs of growth are visible)
4. Volume growth – this can be looked at in multiple ways depending the type of business (i.e new customers acquired, amount of units sold). Dividing it a level further by segments, regions can provide more clarity.
5. Unit economics – breaking the cost down to the lowest unit level which really matters. As any business it’s a sum of parts – product A, B can have significant volumes but product C is the one with the highest margins. So, having this kind of knowledge can help you in turbocharging the business in a true sense. These are interconnected and are indicated using a waterfall chart in a page. Listing some below –
   1. Cost per unit (COGS per unit)
   2. Customer acquisition cost (CAC) per unit
   3. Margin per unit
   4. Profit/loss per unit
6. Unit price – selling price to the customer, how is it different from the market (in percentage terms vs closest competitor). Is the pricing driven by the internal cost structure plus a predetermined margin or pegged with the market (eg. additional premium being commanded)
7. Customer lifetime value (also lifetime value (LTV)) – can be computed as below. Indicates whether the business has been able to provide the full value to the customers served and how a company can improve efficiency at various levels internally in future.
   1. (Average revenue per customer) x (gross profit margin) x (retention rate)
   2. (Average revenue per customer) x (number of purchase per year) x (average length of customer relationship)
8. Inventory turnover – how quickly the products company has created are moving out of the production and being lapped up by the customers. The higher the better indicating the operational efficiency. Computed by dividing the COGS (cost of goods sold) by average inventory.
9. Customer satisfaction (NPS) – no better stage to attain for any company when the customers turn into brand evangelists themselves. The ultimate nirvana, albeit measuring this is the most challenging but most rewarding metric at the same time. 

Having knowledge of these vital metrics can not only help you stand out during an investor meeting but can also help drive better decisions internally as well.

While you are busy keeping your operations up and running, if you need support to create such metric towers/MIS to navigate business better, feel free to give us a shout.

By:
Nikhil Gupta (nikhil@minervagc.com)