Nigerian entrepreneur and founder of Gloopro, Olumide Olusanya, recently shared a Twitter thread explaining ways African founders can successfully run their startups.

Mr Olusanya said he used metrics when setting up his business and believes other founders might find it useful.

Bua group

Going further, he said the metrics has helped him to weigh options and also stay rational throughout the building of his business. He also added that his metrics prevented him from getting distracted by the news and hypes characteristic of the Nigerian/African startups ecosystems.

Here are the four efficiency metrics as listed by Olumide.

Annual Revenue Run Rate (ARR): Funds Raised Ratio

Olumide explained that the AAR shows how one is using the investor’s funds to create net revenue. He said the higher the ratio, the better.

He further explained it thus: ”if a founder has used half the funds I’ve raised to get to same level of net revenue traction, it’s a measure of being better than I am as a founder or having a better team than I’ve and/or a better product than my team has managed to build, all other things being equal’.’

He added that the terminal consequence of the AAR metric is easily seen during exit, such as when one founder has raised $20m for a startup that exits at $40m and another only raised total of $2m to get to the same outcome.

See tweet below.

Revenue Per Employee

Olumide said that regardless of how having a big staff for a startup is often projected as a good thing, he personally doesn’t think of it as something to be proud of unless the startup is generating enough according to its size.

He gave an example: ”If you say you have 1,000 employees, the way that number becomes impressive is by comparing your startup’s Revenue per Employee to that of the global benchmarks for your industry.”

CAC Payback Ratio

According to Olusanya, when dealing with CAC, one should keep it simple. Divide total cost—direct & indirect—borne per month in winning new customers by a number of customers won per month.

The 40% Rule Multiple 

Even though the Rule of 40% typically applies to SAAS companies, Olusanya said he adapted it for himself.

He explained how it thus: ”when your annual revenue growth rate + EBITDA margin must ~=40%. e.g if you’re growing revenue 100% YoY, you shouldn’t do EBITDA loss margin.”

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