Being a first-time founder is an interesting but difficult life shift. The skills that helped you create a great product are different from the skills you need to build a great business. The biggest part of that shift is learning how to make your startup attractive to investors, and that requires a new language – financial metrics.

This guide is your startup financial metrics cheat sheet. We’ll provide a clear startup financial metrics definition for each term, show you practical startup financial metrics examples, and explain the meaning behind the numbers so you can lead with confidence.

Part 1: The Foundation – The 3 Core Financial Statements

Your entire financial model is built upon the 3-Statements. They are the bedrock of financial reporting and work together to provide a holistic view of your company. A Pro-Forma simply projects these statements into the future.

1. Profit & Loss (P&L) Statement:
   Shows your financial performance over a period of time (a month, quarter, or year). It tells the story of your profitability.
2. Balance Sheet:
   A snapshot of your company’s financial position at a single point in time, detailing what you own (Assets) and what you owe (Liabilities).
3. Cash Flow Statement:
   Tracks the actual cash moving in and out of your company. It is the ultimate measure of your company’s ability to survive and operate.

Part 2: The Profit & Loss (P&L) Statement – Measuring Performance

The P&L is where you track your path to profitability.

• Revenue:
  The top-line income generated from your sales.
• COGS (Cost of Goods Sold):
  The direct costs to deliver your service (e.g., hosting, third-party APIs, direct support labor).
• Gross Margin:
  Your Revenue – COGS. This shows the core profitability of your product.
• Operating Expenses (OpEx):
  The ongoing costs to run the business.
  • R&D (Research & Development): Costs to build and maintain your product.
  • S&M (Sales & Marketing): All costs associated with acquiring customers.
  • G&A (General & Administrative): Overhead costs like salaries, rent, and software.
• Operating Profit (EBITDA):
  Earnings Before Interest, Taxes, Depreciation, and Amortization. A key metric for your core operational performance.
• D&A (Depreciation & Amortization):
  Expensing the cost of your long-term assets (PP&E Assets and Intangibles Assets) over their useful life.
• EBIT (Earnings Before Interest & Taxes):
  EBITDA – D&A. Shows profit from core business operations.
• Interest:
  The cost of any borrowed money (Loan).
• Profit Before Tax (EBT):
  Your profit before income taxes are deducted.
• Net Profit:
  The “bottom line”—your profit after all expenses are paid.

Part 3: The Balance Sheet – A Snapshot of Financial Health

The Balance Sheet must always balance: Assets = Liabilities + Equity.

Assets: What You Own

• Assets:
  All economic resources controlled by your company.
• Current Assets:
  Assets you expect to convert to cash within a year.
  • Cash / Cash Equivalent: The funds in your bank accounts.
  • Account Receivable (Days Sales Outstanding – DSO): Money owed to you by customers. DSO measures how quickly you collect it.
• Long Term Assets:
  Assets with a lifespan of more than a year.
  • PP&E Assets (Property, Plant, and Equipment): Tangible items like laptops and office furniture.
  • Intangible Assets: Non-physical assets like patents or trademarks.

Liabilities: What You Owe

• Liabilities:
  Your company’s financial obligations.
• Current Liabilities:
  Debts due within one year.
  • Accounts Payable (Days Payable Outstanding – DPO): Money you owe to suppliers. DPO measures how quickly you pay them.
  • Short Term Loans: A Loan due within one year.
  • Deferred Revenue: Cash received from customers for services you have not yet delivered. A critical liability for subscription businesses.
• Long Term Liabilities:
  Debts due after one year.
  • Long Term Loans: A Loan with a term of more than one year.

Equity: The Owners’ Stake

• Equity & Retained Earnings:
  Represents the ownership stake in your company.
• Shareholders’ Equity (or Owners’ Equity):
  The net worth of the company (Assets – Liabilities).
• Retained Earnings:
  Profits that are reinvested back into the business instead of being paid out to shareholders.
• Current Equity:
  The present value of the ownership stake.

Part 4: The Cash Flow Statement – Tracking Your Lifeblood

This statement reconciles your Net Profit back to the actual change in your cash balance. It is the ultimate truth of your business’s health.

• Operating Cash Flow:
  The cash generated from your core business operations.
• Investing Cash Flow:
  Cash used for or generated from investments. This includes:
  • Capital Expenditures (CapEx): Funds used to acquire or upgrade long-term assets like PP&E Assets.
• Financing Cash Flow:
  Cash flow between a company and its owners/creditors. This includes:
  • Equity Investments: Cash received from investors in exchange for Shares.
  • Loan: Cash received from or paid to lenders.
• The Cash Reconciliation:
  • Beginning Cash Balance: The cash you started with.
  • Change In Cash: The net result from all the cash flows above.
  • Ending Cash Balance: The cash you end the period with (Beginning Cash Balance + Change in Cash).

Part 5: Essential SaaS & Fundraising Metrics

These are the metrics investors will scrutinize in your financial model to assess your growth potential and capital efficiency.

SaaS Recurring Revenue Metrics

• Recurring Revenue:
  The portion of your company’s revenue that is predictable and likely to continue.
• MRR (Monthly Recurring Revenue):
  Your predictable revenue on a monthly basis.
• ACV (Annual Contract Value):
  The value of a subscription contract over a 12-month period.
• ARPA (Average Revenue Per Account):
  The average revenue you get per customer (MRR / Total Customers).
• Churn:
  The rate at which you lose customers or revenue. A critical measure of customer satisfaction and product-market fit.

Founder & Fundraising Metrics

• Burn Rate:
  The speed at which your company is spending its capital.
  • Gross Burn: Your total monthly expenses.
  • Net Burn: Gross Burn – Revenue. This is your actual monthly cash loss.
  • Average Monthly Burn: Your Net Burn averaged over several months.
• Runway:
  The number of months you can operate before you run out of cash (Total Cash / Net Burn).
• Breakeven run rate:
  The revenue level needed for your Net Burn to become zero.
• Shares:
  Units of ownership interest in a corporation or financial asset.
• Unit Economics:
  The direct revenues and costs of a single customer.
  • LTV (Customer Lifetime Value): The total profit you can expect from a single customer over their entire time with you.
  • CAC (Customer Acquisition Cost): The total cost to acquire one new customer.
  • LTV / CAC Ratio: A critical ratio that compares customer lifetime value to customer acquisition cost. A healthy ratio is typically 3:1 or higher.
  • CAC Payback: The number of months it takes to earn back the money you spent to acquire a customer.