The Importance of Business Metrics for Startups…

In the context of startups, metrics are parameters used for quantitative assessment of performance and progress of a venture. If goals are about where to go and strategy is about how to go there, metrics are about tracking progress of your journey.

Startup phase is about discovering what works and what does not. Scale up phase is about replicating what worked. For companies, especially startups and early-stage companies, metrics help founders identify what is working and what is not. 

Why are metrics important for startups?

Because in your journey, you don’t want to discover at a very late stage that you progressed well, but in a different direction, or were going in the right direction but at a different pace than estimated.

The journey of a startup is about making certain assumptions about what will happen once you launch your product or service in the market, and doing several experiments to ascertain if those assumptions are valid, and what is working and what is not working around the assumptions. E.g. If you assume that 1.5% of all registered customers will buy, you first need to track if that is indeed the case in the market. And whatever the outcome i.e. whether 0.5% registered users buy or 3% users buy, what you need to know are the reasons for the outcomes so that you can avoid what did not work and replicate what worked.

Success of a startup is NOT in executing a plan well but in adjusting plans efficiently, appropriately and effectively, in order to go in the direction that the venture was intended to. Metrics provide early warning signs – whether good or bad. It helps you adjust your plans based on quantifiable data on what impacts the outcome. Metrics help you make better-informed decisions in making adjustments in your plan.

IS NOT ALWAYS ABOUT IMPROVING YOUR METRICS

  • Performance does not necessarily improve with scale e.g.
  • Easier to grow faster when smaller 
  • Early customer acquisition costs may not hold good over time
  • Some initial aspects that impact metrics cannot scale
    • g. founders selling to the concept to enterprise customers can have a very different result than sales teams
    • PR efforts and e-mail marketing does not scale beyond a point 
    • Organically acquired, early customers through connections cannot scale
    • SEM, SEO do not scale beyond a point 
    • Early customer engagement may not hold good at scale 
  • Early customers MAY have chosen your product because they desperately wanted that solution. Later adopters may be less enthusiastic users.
  • ARPU may decline over time 

Spend time to THINK ABOUT METRICS THAT ARE IMPORTANT.

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