Metrics up, metric down, conversion up, users down

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Startups are full of metrics and numbers, especially when they start to look for investment. Ask any investor in tech and I would bet you that every one of them has come up against a company which initially looks like they have great metrics, but when they dig deeper they can find all kinds of crazy or unearthed gold metrics.

As a product manager you’ll be looking at growth and conversions heavily, all experiments are about growth and each experiment relies on conversions. Here’s just a few metrics

Users, Organic users, Sessions, SQLs, MQLs, Leads, Customers, Bookings, Subscriptions, Revenue, Gross profit, Net profit and so many more.

Even the definition of users can be very different in every company. One thing I do when I join a start-up is to get under the hood of each metric, to make sure I know what it is and what it isn’t? Is a user someone who comes to the site, or are they signed in users, or are they just organic, are they unique or are they just sessions. I’ve rarely come across an early startup that has these documented, so once I find out the details behind each metric I publish them openly, so that everyone is on the same page.

With so many metrics and usually many people responsible for different ones it can be hard to tell how the whole company is doing. Obviously anything money based is a great starting place. But, profit and revenue can hide underlying issues in some metrics. So, in order to combat this I like to measure my metrics against revenue, you could do it against profit too, this might be a healthier option.

Turnover is vanity, profit is sanity

And cash is king

Let’s for argument sake say we have these funnel metrics that we are tracking.

  • Organic users
  • MQLs (Marketing Qualified Leads)
  • SQLs (Sales Qualified Leads)
  • Customers
  • Revenue

We of course have conversion metrics

  • Organic users to MQLs
  • MQLs to SQLs
  • SQLs to Customers
  • Average order value (AOV)

So that’s now nine metrics to follow and check to understand how we are doing. This is where I like to get two metrics that my stakeholders can receive and understand how we are all doing as a collective. They are

  • Average Revenue Per User (ARPU as it’s known)
  • Average Revenue Per Customer (ARPC)

Here you might say, what if a funnel metric goes down? And you are right to ask that, you’re thinking like a Product manager. If Average Revenue Per User (ARPU) is going up you can 100% declare that the Growth team is doing a good job and if ARPU is trending down, you can definitely say someone in the growth team needs to look at something.

If, as a trend your APRU is going down then you need to drill deeper, first I look at Average Revenue Per Customer and see how that is trending and if that is looking healthy then I move to other metrics, I actually have a system that starts at the end of the funnel conversion metrics and work my way up. Now beware, it might not be one metric that causing a decline, it might be more than one, so don’t stop at the first issue you find. Keep looking up that funnel.

If, as a trend your APRU is going up then you can go home and put your feel up… well in truth you can’t go home (and not just because you’re a remote worker) also because a good Product Manager will want to know what’s going well, what can he/she exploit or what can he/she improve. I actually put all my metrics against revenue.

  • Average Revenue Per MQL (Marketing Qualified Lead)
  • Average Revenue Per SQL (Sales Qualified Lead)
  • Average Revenue Per Customer
  • AOV

I then home in on the worst performing metric, the one that’s increasing least, week on week or month on month. And then guess what I do?! I drill deeper in to find where or what is holding us back.

The more you dig, the more likely you’ll find gold, beware of black holes you can get lost down one of those for weeks.


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