How do I measure my start-up’s growth? To measure it what are the key metrics that I must observe? The answers to these questions decide the progress of every business. For an early-stage startup, either you are not tracking your growth at all or you’re tracking it too much. Hence, tracking the right amount of data considering a particular stage is crucial in setting KPI for an early-stage startup.
Also, this term might sound dearer to an MBA journal but not to a startup. As an early-stage startup you might not have much to track, but tracking KPIs is a prerequisite.
What Is KPI And Why Is It So Important For My Startup?
KPI stands for Key Performance Indicators which are a set of quantitative metrics that shows how well your business is doing. To grow a startup you need to be introspective, progressive, and humble at the same time. And nothing in the world can do this better than numbers. Because numbers never lie!
To know whether you are doing better or just fair you must keep a track of your KPI. The board members decide the plans and areas of improvement after studying these key metrics. This feedback mechanism helps the startup to plan the future strategies like acquisition, scale-up, new product development, etc.
How To Choose Primary Metric Of KPI?
A metric on which a startup could concentrate its total growth is a Primary Metric of KPI. It must quantify the value you deliver to your users. The metric should capture the recurring value offered to the users and work as a feedback mechanism for future decisions and strategies. These metrics are funnelled through either money or time. The most commonly used metrics to keep a track of your KPI are Monthly Recurring Revenue (MRR) and Active Users – i.e. Daily Active Users (DAU) or Monthly Active Users (MAU).
The primary metric of KPI must be a lagging indicator of your growth which means it must give you a glimpse of your journey so far. A lagging indicator is an easily traceable indicator that acquires data in a short period.
For example, while setting KPI for an early-stage startup,if you consider email sign-ups as a primary metric it cannot represent the growth in the long run. But if you consider monthly revenue instead of email sign-ups, it provides value as a metric. Because the monthly revenue increases when customers pay the value but not when the potential customers sign up via email.
“One common mistake early startup founders do is that they only track the primary metric and completely ignore the secondary metric. For example, if you only track Monthly Daily Users without tracking Retention or User Acquisition, it will be meaningless.”
How To Choose Secondary Metric Of KPI?
The metric when paired with the primary metric gives a 360-degree overview of the company’s growth is a Secondary Metric of KPI. For a digital or tech startup, these metrics can be traffic, visitors, user retention, and other website actions. But if your startup is a B2B or a customer service you can use metrics such as purchases, signup forms, feedback, etc. to keep a track of your KPI.
Setting KPIs For An Early Stage Startup
- Identify the stage and type of your startup
You must never copy the KPIs of any business model as they might differ according to the nature of the business. Setting too many objectives and goals at an early stage (like product designing) is not recommended.
- Determine your objective
Based on your startup stage and the nature of the business, you must choose your objectives.
For example – Increase the user retention in six months.
- Define your strategy to achieve the objective
Once you have a definite objective, plan a strategic road map to achieve that objective.
For example – To achieve more user retention, the company must work towards
- Developing a better user experience
- Quick issue resolving
- Notify and keep in touch with the users
- Decide the measurement of the objectives
The strategies developed to achieve the objective must be tracked.
For example – Track the feedbacks from users to know if they have a better experience.
- Write KPIs
Your KPI will be a goal statement that is SMART – specific, measurable, attainable, relevant and time-bound. It is a long sentence with no jargon that includes the target deadline.
For example – Increase the user retention to 15,000 users by 27th May 2021.
“What gets measured gets managed. What gets managed gets higher profitability of success and avoids negative consequences”