The 3 Core Metrics Behind Every Scalable Business
In this article, we’ll break down the three core metrics that form the foundation of every scalable business going from 1 to 10.
Going from 1 to 10 is a defining chapter in a startup’s life. At this stage, you’ve moved beyond the adrenaline of launching and early adoption. You’ve seen a handful of customers genuinely use your product, some might even love it, and you’re starting to ask: “Can we do this consistently? Can we grow without breaking everything?”
The 0 to 1 stage is about discovery- experimenting, iterating, and validating that what you’ve built truly matters to a specific group of people. But once you’ve found that initial traction- a few paying customers, consistent engagement, or repeat usage, you enter the 1 to 10 stage. This is the transition from finding fit to building repeatability.
And that’s precisely why the 1 to 10 phase revolves around three fundamental metrics that truly reveal whether your business is ready to scale.
1. Retention Rate
If people aren’t sticking around, nothing else matters. Founders often assume that high signups equal success. But ask yourself:
Are users still coming back after 7 days, 30 days, or 90 days?
Are they finding repeated value or just giving your product a one-time try?
Retention shows whether your solution solves a recurring problem. For instance, consider a SaaS founder who spent months building a workflow tool. Launch day felt amazing- 200 signups in the first week. But if 70% of them churn within 30 days, all that effort is wasted.
How to Measure Retention Rate?
Track cohort retention, i.e., how many users from a specific time period are still active after X days or months.
In SaaS or subscription models, measure:
Logo Retention (%) = (Customers at End of Period ÷ Customers at Start) × 100
Revenue Retention (%) = (MRR from Existing Customers ÷ MRR at Start) × 100
**MRR stands for Monthly Recurring Revenue, which is the predictable revenue a company expects to receive each month from its subscription-based customers.
Ideal Benchmarks
If your retention is below these numbers, it’s not necessarily a failure, but it surely is a warning bell that you must not ignore.
Note: Watch out for retention curves flattening- a strong PMF signal.
2. LTV: CAC Ratio
Once users stick around, the next question is: “Can we acquire them profitably?” This is where LTV: CAC becomes important.
Early-stage founders often burn money chasing growth. You might be spending ₹10,000 on ads to acquire a single customer who churns in a month. That’s a recipe for burnout, not scale. A strong LTV: CAC ratio ensures you’re creating long-term value greater than acquisition cost.
It’s also one of the first things investors look at in the 1 to 10 stage, which shows whether your business model can scale without burning cash.
How to Measure LTV: CAC Ratio?
LTV (Lifetime Value) = ARPU × Gross Margin × Average Customer Lifespan
CAC (Customer Acquisition Cost) = (Sales + Marketing Spend) ÷ New Customers Acquired
Then,
LTV: CAC Ratio = LTV ÷ CAC
Example:
ARPU = ₹1,000/month
Average Lifespan = 12 months
Gross Margin = 80%
So, LTV = 1,000 × 12 × 0.8 = ₹9,600CAC = ₹3,200
So, LTV:CAC = 3:1
** ARPU stands for Average Revenue Per User, a metric used to measure the average revenue generated from each user over a specific period. It is calculated by dividing the total revenue by the total number of users during that same period.
Ideal Benchmarks
If your ratio < 1.5:1 - You’re burning too much for too little retention.
If it’s > 5:1 - You might be underinvesting in growth.
Note: Track CAC by channel, not just aggregate. Also, watch for the CAC payback period (how long it takes to recover).
Ideal = < 12 months for SaaS, < 3 months for B2C.
3. Revenue Efficiency
By the time you’re thinking about scaling aggressively, it’s tempting to pour capital into growth. But without measuring revenue efficiency, you risk growing your way to bankruptcy.
Revenue Efficiency tells you how much new revenue you generate for every rupee of burn. It’s particularly important for bootstrapped founders or early-stage startups with limited runway. This metric defines your ability to scale responsibly in the 1 to 10 stage, especially for venture-backed startups.
How to Measure Revenue Efficiency?
Revenue Efficiency (or Burn Multiple) = Net New ARR ÷ Net Burn
Example:
Added ₹12L ARR in a quarter
Burned ₹6L
Revenue Efficiency = 2x
So, for every ₹1 you burned, you added ₹2 in recurring revenue.
Alternatively, for bootstrapped or consumer businesses:
Track Revenue-to-Expense Ratio = Revenue ÷ Operating Expense
** Annual Recurring Revenue (ARR) is the total predictable subscription-based revenue a company expects to earn each calendar year.
Ideal Benchmarks
In other words:
<1x: You’re spending too much for too little growth.
2–3x: You’re in the “investable” zone- strong unit economics.
Note: Monitor marginal efficiency (revenue added per incremental spend) and tie revenue growth to organic or repeatable channels.
How do these Metrics Work Together?
One of the most critical lessons in the 1 to 10 journey is that these three metrics don’t exist in isolation- they are deeply interdependent.
Retention tells you your product works
Low retention directly suppresses your LTV. Even if CAC is low, the business can’t scale profitably because your customers aren’t sticking around long enough to cover the acquisition cost.
LTV: CAC tells you growth is profitable
LTV is built on retention. CAC is built on your ability to acquire efficiently. If retention drops, LTV decreases, and your CAC: LTV ratio suffers.
Revenue Efficiency tells you that scaling is sustainable.
Revenue efficiency captures the combined effect of retention and CAC in real-world operations. It ensures that growth is theoretically profitable and sustainable across channels, teams, and infrastructure.
Final Thoughts
Founders often get lost tracking dozens of KPIs, but the truth is, most of them don’t tell you what really matters. Instead, focus on the three metrics that give you a clear view of your business’s health.
When these three metrics are strong, they become the foundation for everything else. Fundraising becomes easier because investors see a healthy growth engine.
In short, don’t drown in dashboards. Focus on the numbers that tell the truth. Nail retention, scale sustainably, and optimise revenue efficiency, and you’ll find that building, growing, and winning in the 1 to 10 phase becomes far less daunting.
Disclaimer: The information provided in this article is for general guidance and educational purposes only. It is not intended to serve as legal, tax, or financial advice.
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