By Kash Mathur
Success in the startup space is no small undertaking. You’re trying to validate your product and simultaneously trying to develop a customer base, secure funds, establish a sustainable business model, and find the right people to bring on board. All that and figuring out how to scale, too!
With your attention so divided, it can be difficult to focus on the key metrics essential to scale. Yet metrics are a necessary component of strategic planning. Leave them by the wayside or pick the wrong ones, and you’ll find yourself driving with no clear direction.
Your early-stage business needs you to diligently—and regularly—track metrics. Once you establish pillars for your business, determine daily or weekly performance indicators that will lead to their success. If goals are not set, tracking KPIs is useless; you may end up making decisions based on irrelevant information and risk deviating from the steps necessary to achieve your goals.
Meanwhile, don’t fall victim to a common startup trap: overcomplicated reporting. Many startups try to automate everything. If that’s not possible, chances are good it can be done manually. Google Drive, Microsoft OneDrive, and Apple’s iCloud all provide access to spreadsheets employees can work on or edit. Put in a bit of manual effort and then get the metrics out to the team.
Understanding key metrics
While deciding where to focus your attention can be a challenge, there are certain types of metrics startups need to monitor regularly.
Rising to the top of the list are leading versus lagging metrics. Leading metrics are those a team acts on, as they’re often seen as business drivers and can shift at a moment’s notice. For example, a social app’s leading indicators may include the number of daily active users or the number of messages sent, while an SaaS platform’s leading indicators might be more sales-focused, such as the number of demos requested or qualified leads captured. Consider them precursors of what’s to come: your trend forecasting.
Lagging metrics, on the other hand, are outputs of leading metrics. They measure performance, like products sold per day or return on investment. Both leading and lagging generally roll up into your key metrics, which the company and investors will rally around to show success.
Many startups make the mistake of focusing only on review metrics when the leading metrics—the daily actions that drive the review metric—are far more pressing. When tracking sales revenue, for example, you have to check the daily inputs. If you check on the sales review metric only once each month, it will be too late to respond to what you’re seeing. When you determine your performance indicators, you need to also figure out the daily and weekly leading metrics that roll up to the overall (lagging) review metric. Otherwise, you risk losing sight of what it takes to get to the overarching goal.
Beyond that, establishing clear business objectives is another way to measure the success of your venture. Are you going to focus first on growth, for example, or on maximizing profitability? Obviously, you want to grow and be profitable, but different actions will get you to each goal. You want to take a macro view of your business and look at the marketplace as a whole. This will help you to decide on additional metrics to benchmark your progress.