Here’s a list of things I monitor closely when assessing the health of a startup.
- ARR-to-FTE Ratio → This is the ratio of your startup’s existing ARR relative to how many full-time employees are on staff. Each ARR bands have their different optimal ratios, but for a company that is doing $1MM - $2MM ARR, a good ratio is $100K/FTE to $150K/FTE. This equates to roughly 10-20 employees at the lower bound of a good ratio. Any more and you’re over-hiring — stop the bleeding by trimming the fat and retaining only those who move the company forward in a significant way.
- Asset-to-Debt Ratio →
- Development Velocity →