Every startup – including those in the fintech sector – needs to keep a close eye on certain key performance indicators (KPIs) to maintain financial health and drive growth. Tracking metrics on a monthly basis helps founders spot trends early, make informed decisions, and communicate progress to investors. Whether your company is just launching or scaling up, monitoring these essential metrics will provide a clear picture of your business’s performance and sustainability.
Cash Flow and Runway
Keeping an eye on cash flow is critical for any startup to ensure it doesn’t run out of money. Two of the most vital indicators of financial health in this area are burn rate and cash runway:
- Burn Rate: Burn rate measures how much cash your startup is spending (or “burning”) every month. It comes in two forms – gross burn (the total cash outflow due to all expenses) and net burn (cash outflow minus any cash inflow from revenue). For example, spending $50,000 in a month while making $20,000 in revenue means a net burn of $30,000. Knowing your burn rate helps you understand how quickly you’re using up cash and if your current spending is sustainable. High burn rates are common early on when investing in growth, but must be managed carefully to avoid running out of cash.
- Runway: Runway tells you how many months your startup can continue operating at its current burn rate before running out of cash. It’s calculated by dividing your current cash balance by the net burn rate. For instance, if you have $300,000 in the bank and a net burn of $30,000 per month, you have a 10-month runway. Tracking runway is crucial because it indicates how much time you have to reach profitability or secure additional funding. A short runway (under 6–12 months) is a warning sign that you need to cut costs, boost revenue, or raise funds soon to avoid running out of cash.
Revenue and Growth Metrics
Beyond just surviving, startups need to show that they can grow. Revenue and growth metrics should be reviewed monthly to ensure the business is heading in the right direction:
- Monthly Recurring Revenue (MRR): For startups with subscription-based models (common in SaaS and fintech), MRR represents the total recurring revenue earned each month from customers. Tracking MRR (or simply total monthly revenue for non-subscription businesses) shows whether your revenue is growing steadily. Consistent monthly increases signal that your customer base and sales are expanding.
- Monthly Growth Rate: This metric shows the rate at which your revenue (or user base, or any key metric) is growing each month, usually expressed as a percentage. For example, if you earned $100,000 in revenue last month and $110,000 this month, your month-over-month revenue growth rate is 10%. Startups often target aggressive growth to quickly capture market share. Monitoring this metric helps set targets and quickly spot any slowdowns in growth. Rapid growth is a positive sign, but it must be sustainable and not achieved by reckless spending.
Profitability and Efficiency
While growth is important, so is moving toward profitability and ensuring your business model makes economic sense. Startups should monitor efficiency metrics that reveal how well they are managing costs relative to revenue:
Gross Margin: Gross margin is the percentage of revenue left over after paying the direct costs associated with producing your product or service – usually referred to as cost of goods sold, or COGS. Gross margin is one of the most important measures of how much efficiency you are getting out of the core business you are operating. For example, assume that your fintech startup generated $200,000 of revenue this month, and you had a direct cost of $80,000 (think transaction processing fees, service delivery costs, etc.). This means that your gross margin is 60%.
The higher the gross margin percentage, the more money you are retaining from every dollar of sales, and it is money that you can then use to offset operating expenses, and ultimately, to contribute to profit. And tracking gross margin on a scale of monthly allows you to be confident that in the process of scaling from a conversion to a real business, that the cost to deliver your product is not eroding potential profits.
Operating Profit (or EBITDA): Operating profit is the amount left over after all operating expenses – salaries, rent, and marketing – are deducted from your gross profit. A common variation, which excludes financing costs and non-cash costs and using the cost of goods sold is EBITDA which stands for Earnings Before Interest, Taxes, Depreciation, and Amortization – it essentially looks to measure core operational profit. Most early-stage startups will operate at a loss, which means you likely won’t have any positive operating profit yet either. Tracking your operating profit (or EBITDA) as a monthly figure, does provide visibility of whether or not you are heading in the right direction.
Over time, you want to see your losses decreasing and your margins improving as your revenue grows. Operating profit (or EBITDA) is also a key number for investors to track as a measure of the long-term viability of the business.
Customer Acquisition and Retention
Sustainable growth also depends on efficiently acquiring customers and keeping them on board. In the fintech world, for example, attracting users to a new banking app or payment platform is only half the battle – you also need to retain those users. Key KPIs in this area include:
Customer Acquisition Cost (CAC):
The CAC, or Customer Acquisition Cost, is the average amount you spend to acquire a new customer. To calculate this, you take all your marketing and sales costs for the month and divide it by the number of new customers gained during that month. Let’s say in a month you spent $40,000 on marketing and gained 400 new customers so your CAC is $100. An important aspect of CAC is to track it monthly to make sure your marketing methods are cost effective. If your CAC is rising month after month, it may suggest the need to re-evaluate the current marketing strategy. You ideally want your CAC to be much lower than the amount of revenue earned (LTV) from each customer. Otherwise, you’re spending more to acquire customers than what you’re generating, which cannot be sustained. .
Customer Lifecycle Value (LTV):
LTV refers to the total revenue you expect to earn from an average customer over the entire time they do business with you. For example, if the average customer stays for 2 years and pays $50 a month, that customer’s LTV is $1,200 ($50 * 24 months). When reviewing LTV, it is generally useful to also look at LTV compared to CAC – successful businesses typically have an LTV that is several times the CAC. Monitoring LTV over time can help you see whether customers are staying longer or spending more or figure out the cause for them leaving sooner related to any changes you have made. For fintech startups, LTV can improve by helping users adopt more of your financial services, or increase user engagement so that the users continue to use your services over an extended time.
Churn Rate (Customer Attrition):
Churn is the percent of customers who cancel or stop using your product during a designated time frame. For example, if you started the month with 1,000 customers and you ended the month with 950 customers (so, 50 lost customers), your monthly churn rate is 5%. Churn rate is essentially the opposite of retention rate (in this case, 95%). Keeping churn low is vital – if you’re faced with high churn, you lose customers almost as quickly as you gain them, which makes growth more difficult. By measuring churn every month, you can identify whether changes to your product or customer service may be creating churn issues. By reducing churn (or increasing retention), you will improve LTV and make growth easier, because you get more value from each customer you worked hard to acquire.
How ERB Can Help with KPI Tracking
Monitoring these KPIs consistently can be challenging for a busy startup team. This is where partnering with financial experts like ERB can make a big difference. ERB is a financial services firm that specializes in helping startups (including fintech companies) manage their finances strategically. An experienced outsourced CFO team like ERB can help implement robust systems to track all these metrics accurately in real time.
ERB helps set up dashboards and financial reports to give founders a clear monthly view, and they analyze the numbers behind metrics like burn rate, runway, and gross margin to identify trends or issues. With deep expertise in budgeting and financial planning, the ERB team also guides startups on how to improve these KPIs (for example, finding ways to reduce burn or optimize expenses to improve margins). By handling day-to-day accounting and compliance, ERB frees up founders to focus on product and growth while ensuring that key metrics are diligently monitored. In short, ERB acts as a seasoned financial partner, helping startups turn their KPI data into informed decisions and sustainable growth.
Conclusion
In the dynamic startup and fintech environment, knowing your numbers is half the battle. By tracking metrics like burn rate, runway, gross margin, CAC, LTV, and churn every month, founders can catch problems early and double down on what’s working. These KPIs provide a factual basis for strategic decisions – from adjusting budgets and refining marketing campaigns to setting growth targets and seeking investment at the right time. With disciplined monitoring and the right support, startups can navigate their growth journey with confidence and stay on course toward success.