Key performance indicators are a crucial way to measure the success of your startup. Defining vital KPIs are a must-have, but they’re also easy to mess up. A good metric should help you quantify your business performance and give you data to help you progress.
With that said, you need to know how to define the right KPIs to help you build on your data. Here’s how to find the metrics you need to move your startup in the right direction.
Setting Up Your Definitions
A critical aspect of a startup is working with a shared mindset. This mindset should also extend to the definition of terms for the company. Why is this even important?
You want your team to share the same terms and be on the same page. With properly shared terminology across team members, you can reference these definitions and expect everyone on the same starting point.
For starters, what is a key performance indicator?
Key performance indicators measure if the product is pushing the outcome you need. The results should come out of your objectives and provide quantifiable information. Startups should have limited KPIs set for a long-term measure of performance.
Objectives should work towards actions that impact your business. Whether applying ETL for startups or following your standard business model, you want goals that propel you forward.
Below key performance indicators are several types of metrics that you want to be sensitive to strategic changes in the business. These metrics include product KPIs and product health metrics.
Product KPIs give business owners a good idea of what makes their product successful. These metrics should be exclusive to such a product, helping in reporting beyond the number of sales.
Product health metrics also underscore the potential consistent value of the product and its overall health. These include user adoption, customer utilization, user retention, and more. These are crucial towards better business progress overall.
What Is A Good Metric?
To get started, it’s crucial to figure out what works as a good metric for your needs. Think about your goals and desired outcomes and stay on a suitable metric for your products and service.
After, you should look at the current set of factors and your resources. Choose which actionable items you can accomplish.
You want your metric to have these characteristics, including:
Metrics should be something that you can measure. You want to have the ability to measure its impact on your business and your product.
You also want the metrics to be actionable – where if the metrics have a clear downtrend, your team can try and improve its performance. You want metrics that you can measure and do something about it. If the KPI is something you can’t improve, there’s no point in tracking it.
Metrics should also be sensitive, changing depending on your action for the product or business. Your efforts should always move the KPI’s needle and measure your impact on it.
A performance metric that accurately measures an activity is challenging to develop. Often, this requires scanning for defects, standardizing, deduplicating, and integrating underlying data before it can be displayed to users. Insufficient system data results in poor performance metrics that users won’t trust.
How To Develop Metrics That Matter
Developing accurate, meaningful, and pertinent KPIs is essential for any new business. It’s easy to get caught up chasing the next potential opportunity without preparing measurement strategies. With that said, there is a way to develop metrics that matter to your startup.
Start With A Clear Business Strategy
Before you can build a good base, you have first to develop a solid strategy. This should include knowing what you want for your business. Keep in mind that setting goals should take some time.
First, you want to ensure that your objective aligns with your outcome. Startups need to have clearly defined goals and a good understanding of your expected result. It’s pointless to develop your goals after the fact, then fit impact metrics retroactively.
You need to know what your goals are and how you’re going to attain them. This should include your company’s objectives and your overall vision. These should be based on the direction you want to take as a business.
Define Your Intended Results
The next step in this process is defining what results you intend to achieve. These could include your financial, ethical, and social impacts. While most companies ultimately look for better financial incentives for their business, there is more to it than money.
Your goals should be clear, but what do you do if you reach them? What should be done if you hit your goal? Your questions should cover consequences should you get the answer you’re looking for.
For example, if you intend to develop a mobile application for your business, then you’ll have to consider your end goal. Is it to grow your user base? Is it to create a platform for other developers? Is it to get more sales?
You can define and build your dashboard to track progress toward that goal with your intended result.
Select The Right Dataset For Your Outcomes
Once you have your strategy and execution plan in place, it’s time to find the correct dataset for the measurements you need to take. To start, you want to look at your unique position in the market. Your company may be generating revenue already, which could help you understand your baseline.
Your company should pinpoint the types of datasets you have available. Your analytics platform should cater to your use-cases and problems you are trying to solve. It should also be able to scale alongside your growth.
Customize Your KPIs
With your defined market position and your collection of relevant data, you can work on your customized list of critical insights. You will build out your dashboards and reports for your metrics based on these.
Some metrics are exclusive to your product or your industry. Start with these metrics first and look for other KPIs indicative of business success when you measure it.
These metrics should be based on their value, but they should be relevant to the industry. Each team member should have their criteria for what data points matter. If you’re using business intelligence, you’d want to look at how each department is contributing to the growth and success of the company.
The Bottom Line
Key performance indicators are fantastic for startups. If you can develop metrics that accurately measure your impact on your business, you should be on your way to consistent growth. Follow these tips and define your KPIs to build on your success.