As a founder building a new product you need to communicate in a clear and concise way the wins and the achievements in this journey to all interested parties, through your numbers (KPI’s). You need to share selectively to all participants with skin in the game.
The most clear and concise way to do so is through your numbers (KPI’s). So make sure you know them well, not only your own numbers but also your market and your competitors. Presenting better numbers (KPI’s) than the competition demonstrates why and how you are executing better that everyone else.
A few numbers (KPI’s) that are important in telling your story are as follows:
Customer Lifetime Value
Customer lifetime value indicates the total revenue a business can reasonably expect from a single customer account throughout a business relationship. Customer Lifetime Value = Customer Value x Average Customer Lifespan where Customer Value is defined as the Average Purchase Value x Average Number of Purchases
A pre-money valuation refers to the value of your company before it receives other investments such as external funding or financing. Put simply, a company’s pre-money valuation is how much money it is worth before anything is invested into it. Where the Pre-Money Valuation = Post Money Valuation – Invested Amount
The calendar months until your company has $0 in the bank and is basically broke, at the current burn rate per month, where Runway = Total Cash Reserve / Monthly Burn Rate
Serviceable Addressable Market (SAM)
Total sales volume of a particular product (or service) that can be sold by all vendors on the market within a geographical area (country, region, city) that you are able to service for the planned period of time (usually a year, a quarter or a month). Where your SAM = (Target Segment TAM) x annual contract value (ACV)
Serviceable Obtainable Market (SOM)
Total sales volume of a particular product (or service) that can be sold by your company within a geographical area (country, region, city) that you are able to service for the planned period (usually a year, a quarter or a month). “Can be sold” is defined as realistic sales forecasts made after taking into account your production, logistic, sales and marketing capabilities, your competitors’ actions and influence, expected market trends and seasonality, where your SOM= % of SAM realistically achieved
Total Addressable Market (TAM)
Total addressable market refers to the total market demand for a particular product or service. It’s the maximum amount of revenue your company can possibly generate by selling their product or service in a specific market. Where your TAM= Average Revenue per User x # of Customers in the Target Market.
Want to learn more on how-to-do, drop us an email and we will be happy to share our knowledge and insights with you!
Christos Lytras – Managing Partner