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17 business metrics PMs should know

Feb. 3, 2025
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The first time you go to a quarterly review, sales report, or other business call, you might feel like the presenters are speaking a different language. I know I was overwhelmed when I first heard those acronyms!

While I tried to put off learning even more acronyms and metrics, in product, these things are incredibly important to understanding how your product aligns with business goals. Watching business metrics has helped me to discover opportunity areas, pinpoint weaknesses, and evaluate the success of my launches.

Here are the top business metrics I learned and use to support my product development process.

Overall Business Health

An illustration of a man standing in front of a graph.

1Customer Acquisition Cost (CAC) measures the average cost of acquiring new customers, calculated by dividing total acquisition-related expenses by the number of new customers. A high LTV to CAC ratio indicates a successful business model.

2Customer lifetime value (CLTV) represents profit generated by a single customer. A high CLTV to CAC ratio indicates profit potential, with CLTV representing revenue and CAC representing costs.

3Churn, or customer attrition, is crucial for subscription services, impacting LTV and ARPA. Calculated as a percentage, it measures customer retention and feature engagement.

4Net Promoter Score (NPS) measures customer loyalty through a single question, categorized into detractors, passives, and promoters. The NPS is calculated by subtracting detractors from promoters, with passives impacting the overall score.

5Market share, calculated as unit or revenue share represents a business’s market position. It reflects a company’s competitive standing and revenue compared to competitors.

Product Usage

An illustration of a man standing in front of a map with a floating data analytics graphic.

6Conversion rates measure task completion, impacting marketing, sales, and product experience. In product management, high conversion rates indicate effective new features.

7Time to Value measures the time from account creation to seeing product value, derived from the unique value proposition. A lower average time to value indicates faster realization of product benefits.

8Daily or Monthly Active Users (DAU or MAU) measures overall product engagement, important for evaluating scale and forecasting LTV. More users generally indicate product success.

9Feature usage rate measures customer engagement with a product or feature. It compares a defined customer group with an engagement metric, making it different from conversion rates, which focus on specific completing a certain task.

Accounting and Finance

An illustration of a man holding a piece of paper, standing in front of and pointing at a graph.

10Recurring revenue, usually measured as annual or monthly recurring revenue (ARR/MRR), excludes one-time revenue and is calculated based on subscription or service income. It can be average, forecasted, or actual, with the latter being the most common.

11Return on Investment (ROI) measures profitability by comparing net income to investment costs. A higher ROI indicates a more profitable investment, so forecasted ROIs often guide VC decision-making.

12Gross Profit Margin (GPM) calculates profit as a percentage of revenue, excluding all costs except the cost of goods sold. Net Profit Margin (NPM) includes all costs and is calculated similarly.

13Cost of Goods Sold (COGS) includes all costs related to goods sold. Several formulas exist to calculate COGS with different types of expenses.

14Earnings before interest, taxes, depreciation, and amortization (EBITA) measures profitability from operations, excluding debt, taxes, and asset depreciation. To calculate EBITA, subtract all costs of the business excluding decline in asset value, cost of debt/borrowing, and taxes.

15Average Revenue per Account or User (ARPA or ARPU) measures the revenue-to-customer ratio. It is calculated by taking the revenue of an organization or product and dividing it by the number of customers, accounts, or users paying for that product. In SaaS companies, ARPA is important to understand business health and shape forecasting models.

16A burn rate is the rate a company consumes cash. Typically expressed as burn (spend) per month, burn rate is used with revenue calculations to estimate runway, or the amount of time a startup has before running out of money.

17Payback period is the time to make back investment funds, important for evaluating startup and VC investments. It is calculated by summing monthly cash flows until the break-even point, expressed as months from investment to profitability.

When you were first learning product management, what business metrics tripped you up? Let me know in the comments below!

Written by Alicia Drinkwater

Business

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Blog Details

17 business metrics PMs should know

Overall Business Health

Product Usage

Accounting and Finance

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