3 Crucial Startup Metrics That Predict Startup Failure Early

By the time most founders realise their startup is failing, it’s already too late to save it. The harsh reality is that 90% of startups fail, but the warning signs appear months before the final collapse. Most founders get caught up tracking vanity metrics like website visits or social media followers, whilst ignoring the financial health indicators that actually matter. As a fractional CTO who’s worked with dozens of SaaS and startup founders, I’ve seen the same patterns repeat time and again. The difference between successful founders and those who fail isn’t talent or luck—it’s tracking the right startup metrics at the right time.

These aren’t complex formulas that require a finance degree to understand. They’re straightforward measurements that any founder can track with basic spreadsheet skills. The three metrics I’m about to share serve as early warning systems, giving you months of advance notice when your business is heading towards trouble.

Let’s dive into the three critical measurements that can save your startup from an early grave.

Startup Metrics #1: Runway – Your Financial Lifeline

Think of your cash runway as the fuel gauge in your car. Just as you wouldn’t drive across the country without checking how much petrol you have, you shouldn’t run a startup without knowing exactly how long your money will last.

Your cash runway is simply the number of months your current cash reserves will cover your operating expenses. The calculation is straightforward: take your total cash in the bank and divide it by your monthly burn rate (how much money you spend each month to keep the business running).

For example, if you have £50,000 in the bank and you’re spending £10,000 per month, you have a five-month runway. Simple as that.

But here’s where most founders go wrong—they calculate their runway once and forget about it. Your burn rate changes constantly. You hire new staff, increase marketing spend, or add new software subscriptions. Meanwhile, your cash reserves decrease every month unless you’re already profitable (which most early-stage startups aren’t).

The golden rule is to never let your runway drop below 12 months without a clear plan to either raise funding or reach profitability. Why 12 months? Because raising investment typically takes 3-6 months, and you need buffer time for unexpected delays or market downturns.

Smart founders track their runway weekly and create scenarios for different growth paths. What happens if you need to hire two more developers? What if that big enterprise deal takes three months longer to close than expected? What if your customer acquisition costs suddenly increase by 50%?

Create a simple spreadsheet that automatically calculates your runway based on different spending scenarios. Set up alerts when your runway drops below certain thresholds—18 months (time to start fundraising), 12 months (panic mode), and 6 months (last chance to make dramatic changes).

Startup Metrics #2: Development Velocity – Time from Zero to One

This metric is inspired by Peter Thiel’s concept in his book “Zero to One”, which describes the journey from creating something entirely new (zero) to having a working product that solves a real problem (one).

For startups, this translates to measuring how quickly you can move from an idea to a product that customers actually want to buy. This isn’t just about coding speed—it’s about your entire organisation’s ability to identify problems, build solutions, and validate them with real customers.

The first milestone is solution-market fit. This is when you’ve built something that solves a genuine problem for a specific group of people. You’ll know you’ve reached this point when customers start using your product regularly and telling others about it.

The second milestone is product-market fit, where you’ve refined your solution to the point where customers can’t imagine living without it. They’re not just using your product—they’re actively recommending it and becoming upset when it’s unavailable.

Why does development velocity matter so much? Because markets move fast, and windows of opportunity close quickly. If you take 18 months to build what could be built in 6 months, you might find that a competitor has already captured your target market.

Track how long each major feature takes from concept to customer feedback. Measure the time between identifying a customer problem and deploying a solution. Most importantly, track how many iterations it takes to get from your initial solution to something customers genuinely love.

The fastest-moving startups create tight feedback loops. They build small features quickly, get them in front of customers immediately, and iterate based on real usage data rather than internal assumptions.

Set targets for your development cycles. For example, no feature should take longer than two weeks from specification to customer testing. No customer problem should remain unsolved for longer than a month once identified.

Startup Metrics #3: Sales Coverage Ratio – Your Path to Profitability

This is the metric that separates the businesses that survive from those that burn through all their cash. It measures what percentage of your monthly burn rate is covered by your monthly sales.

Let’s say you’re spending £20,000 per month to run your business, and you’re bringing in £8,000 per month in revenue. Your sales coverage ratio is 40% (£8,000 ÷ £20,000). This means you’re still £12,000 short each month, and that gap is being filled by your cash reserves.

The goal is to reach 100% coverage (break-even) and eventually exceed it (profitability). But the real value of this metric is in projecting when you’ll reach these milestones based on your current sales trends.

To make accurate projections, you need to understand three key components:

Average ticket size is how much each customer pays you. Whether it’s a one-off purchase or monthly subscription, you need to know your typical deal value. Increasing your average ticket size has an immediate impact on your coverage ratio.

Deal cycle time is how long it takes from first contact with a prospect to closing the sale. If your average deal cycle is three months, you need to account for this delay when projecting future revenue.

Average deals per month is how many new customers you’re acquiring monthly. This number, multiplied by your average ticket size, gives you your monthly new revenue (assuming no churn).

With these three numbers, you can create a projection showing when your sales will cover your burn rate. More importantly, you can model different scenarios. What happens if you reduce your deal cycle by two weeks? What if you increase your average ticket size by 20%? What if you double your monthly deal volume?

Here’s a practical example: if you’re currently at 40% coverage and growing revenue by 10% per month, you’ll reach break-even in about 10 months. But if you can increase that growth rate to 15% per month by improving your sales process, you’ll reach break-even in just 7 months.

Track this metric weekly and always look at the trend, not just the current number. A coverage ratio that’s increasing from 30% to 40% to 50% over three months is excellent news. A ratio that’s stuck at 30% for three months is a red flag.

Your Early Warning System for Startup Success

These three startup metrics work together to create a comprehensive health check for your startup. Your cash runway tells you how much time you have. Your development velocity determines how quickly you can improve your product. Your sales coverage ratio shows whether you’re moving towards sustainability.

The magic happens when you track all three simultaneously. You might have 18 months of runway, but if your development velocity is slow and your sales coverage isn’t improving, you’re still in trouble. Conversely, you might only have 8 months of runway, but if you’re developing fast and your sales coverage is growing rapidly, you’re likely to succeed.

Set up a simple dashboard that shows all three metrics and update it weekly. Create scenarios that show what happens if each metric improves or worsens. Most importantly, set trigger points for action. For example, if your runway drops below 12 months AND your sales coverage isn’t growing, it’s time to either raise funding or significantly reduce costs.

The founders who survive are those who see problems coming months in advance, not those who scramble to react when it’s already too late. These three metrics give you that advance warning system.

Don’t wait until next month or next quarter to start tracking these numbers. The startup that begins measuring today is the one that’s still around this time next year.

Your future self will thank you for the visibility, and your investors will appreciate your proactive approach to business management. Most importantly, you’ll sleep better knowing exactly where your business stands and having a clear view of the road ahead.