Build metrics before you launch.
Having hundreds of metrics is also bad.

Don't hide behind the metrics, still use your own product.

Selecting Key Metrics

• Pick 4-5 metrics
• Use a straightforward analytics solution
• Agree on definitions and stick with them - E.g. active user is user who uses the product daily, weekly, every 4 days, etc.
  If something doesn't work well, don't change metrics.

Vanity Metrics — metrics that look good (big numbers), but are quite useless.

• Revenue in most cases is the key metric.
  • Be honest, even if it's 0 — share it.
• Net burn rate — should be the second metric.
  • Monthly cost minus revenue.
  • Amount your bank account decreases every month.
• Runway is a function of the Net burn rate.
  • E.g. you have 1kk, Net burn rate is 100k, then Runway is 10 month.

Retention

Retention can also be a good metric, it shows how many people keep paying after a period of time.
If Retention is high, you stack the monthly cohorts, business are still growing their Revenue. If Retention period is multiple month then the cohort stack cake is flattening fast, and you reach the plateau.

Net dollar retention

If you had 10 customers, each paying 10k, you get 100k in total. After a year, 2 customers stop using the product, but as you introduce new features, some customers are paying more, e.g. 3 customers pay 20k now, it is 110k in total. Which is 110% Net dollar retention.

You should onboard new customers but still make sure to keep the old customers.

Why you should have high Net dollar retention

• Underpriced product
• Adding new features
• Getting better at sales
  125%-150% is a good Net dollar retention value.

Gross margin

Gross margin is Revenue minus cost of goods sold.
Cost of goods is usually very low for software products.
You should never scale the business with the negative Gross margin.