A while ago, we looked at Dave McClure’s Pirate Metrics model – a model for identifying the key metrics for your business under 5 categories: acquisition, activation, retention, referral and revenue. If you’re not familiar with the model, read this post first, we’ll be here when you get back.

In this post, we will look at how to make sense of the metrics defined by the model once you are collecting data, based on our experiences with real-life startups.

What’s the point?

The three big mistakes we see entrepreneurs making when it comes to metrics are:

  1. Measuring the wrong things
  2. Measuring too many things
  3. Not measuring enough things

Everyone knows metrics are important, and everyone thinks they’ve got a grip on them. In our experience, most people don’t.

The sooner you get your head around metrics, the sooner you’ll start to see real growth.

Forget about what you assume is right, forget about what makes you feel better and start focusing on what matters.

It’s worth noting that once your business has some money in the bank (revenue or investment) you may well employ somebody to just look after your metrics, in which case a more complicated model than AARRR may well be necessary, and actually measuring more things is manageable. The whole point of AARRR is to make a founder’s life manageable with all the others things that she has to do.

Who’s your audience?

Many businesses only have one type of user, but we talk to a lot of companies with at least two. We’re not talking about personas here, but very different types of users with very different needs within the product and the business.

Having two or more user-types is probably most common in market place or ‘sharing-economy’ businesses where users can be either a supplier, demander or both. Airbnb for example, needs both Hosts and Guests to work.

Other instances with two or more user-types might be less obvious. Free content publishers for example, must balance the needs of the user with monetising their content.

If you are a company with two or more user groups, you will need to be tracking metrics for both groups.

However, you should always bear in mind who is your direct customer (i.e. who is giving you the money), and who is an indirect customer. Do you charge a fee to the Host or the Guest? Does the advertiser give you money or does the reader?

Between the Pirate Metrics model, and your own understanding and experience of your business so far, you should be able to identify key metrics to track behaviours related to activation, acquisition, retention, referral and revenue for each type of user.

A note on retention

In his original talk on Pirate Metrics, Dave McClure defines retention simply as “users come back, visit site multiple times.”

For subscription products, retention is simply the percentage of users who did not cancel their subscriptions. SaaS entrepreneurs should check out Christoph Janz’s blog for some of the best posts and resources available on SaaS churn and retention.

But what if you don’t have a subscription business? What if an activated user isn’t simply someone who pays their subscription for the period?

For non-SaaS products, you need to find a tangible and useful way to define retention for your business. Think back to Dave McClure’s definition “users come back, visit site multiple times”.

For many, this will be fairly obvious. With an ecommerce business, for example, you can reasonably assume (but not guarantee), that if a new customer makes a purchase one month, followed by another purchase the next month, they are likely to continue making purchases. Therefore, you might want to define retention as the percentage of new customers in one period who go on to make another purchase in the following period.

The key here is defining your metrics in a way that is genuinely useful to you and your business…

Explaining your metrics

There are two key things that tracking relevant metrics will allow you to do:

  1. Make meaningful decisions
  2. Ask meaningful questions

If you haven’t clearly defined your metrics, the first question is always going to be ‘what does this mean?’

For example, when talking to your board, stakeholders or potential investors, it’s no good just saying retention is 10% and revenue is £100,000. You have to actually understand what this means.

Explain how you defined retention, e.g. 10% of customers who made an order in one month made 1 or more orders in the following month. Talk about whether your revenue is gross or net, monthly or annual.

By removing the uncertainty around your metrics and what they mean, you will allow your stakeholders to start asking meaningful questions that will help you make important strategic decisions.


To really get the most out of your metrics, you need to make sure that you are applying dimensions.

“Dimensions are attributes of your data. For example, the dimension City indicates the city, for example, “Paris” or “New York”, from which a session originates. The dimension Page indicates the URL of a page that is viewed.

“Metrics are quantitative measurements. The metric Sessions is the total number of sessions. The metric Pages/Session is the average number of pages viewed per session.”


Several of our clients have hyper-local apps and for them, it’s incredibly useful to drill down into data from users in specific geographic locations, so they can learn which areas are working best and try to figure out why.

What we see a lot at this point, is founders drowning in data. It’s hard to make meaningful decisions based on more data than you can digest, you’re a startup with limited resources, you need to focus on what matters.

To prevent yourself from getting lost in data, it may be useful to analyse representative samples. For example, you may be able to learn a lot by comparing your least successful customer with data from the most successful. What can you learn about the different ways users get value from your product? How can use this learning to provide more value to the least successful users, and drive evangelism from your most successful?

The key here is that you’re not necessarily using data to answer questions, but rather to inform what questions you ask next.

Additional metrics

The Pirate Metrics model won’t help you track everything and that is exactly the point. “This is not about doing shit loads of metrics” says Dave McClure in his original talk back in 2007. “Choose 5 metrics if you can, certainly no more than 10, measure and iterate, focus on conversion improvement. Most important is hypothesise a customer lifecycle. Your job is to guess what you think people are going to do and measure against that.”

That being said, there are a couple of things missing from the model…

You want to make sure that, on average, each customer brings in more money than it costs to acquire them. Therefore, we often recommend that entrepreneurs supplement AARRR with Lifetime Value (LTV) and Customer Acquisition Cost (CAC).

Instead of covering it all here, we’re going to point you to this fantastic guide to LTV from Kissmetrics that is one of the simplest, most coherent and most useful guides to LTV we’ve seen.

In conclusion

The point in the Pirate Metrics model is to simplify your metrics so that you don’t need a data analyst or expert in the early days of your business.

It’s worth thinking about your metrics in terms of their definitions rather than their labels. Metrics aren’t just numbers, and thinking of them as such will not help you to ask truly valuable questions.

For example, instead of thinking “my retention rate is 95%”, it will be more useful to say “95% of new customers make another purchase the following month”. Instead of thinking “my LTV is £100”, it may be more useful to think “my average customer spends £100 over 2 years and then cancels their account”.

Thinking about your metrics in context will help you ask the right questions and make truly data driven decisions.

Finally remember that, like any model that claims to help you grow your business, Pirate Metrics can only help you if you use it as a framework, not a blueprint. Use the bare bones of the model and flesh it out with your own deep understanding of your business to get the most out of your metrics.

Get in touch with Simpleweb today to discuss the future of your business.

If you’d like to discuss your startup or project, get in touch with Simpleweb today.

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