As a founder, you have to capitalize on the right opportunities for your startup. But unless you’re tracking your performance with the right metrics, it can be hard to scale your startup correctly—and profitably.
It feels like there are as many metrics in the world as there are stars in the sky. It’s impossible and impractical to track every aspect of your startup; that leads to a glut of data that just isn’t helpful.
Startups have to choose what metrics matter to you. These important metrics, called key performance indicators (KPIs), are different company to company. The goal is to use these KPIs to show how effective your startup is at achieving its goals.
Why does my startup need to track KPIs?
If you talk to any avid runner, they’ll be able to tell you the average time it takes them to run a mile. That’s an essential KPI for a runner. As the founder of a startup, you also need to know the critical KPIs that matter for your business.
But why do we care about KPIs, anyway? Isn’t it enough to check your Google Analytics and call it a day?
Absolutely not. Any startup worth its salt focuses on KPIs. After all, without KPIs, you have no way of knowing if your efforts are paying off. You could go along for months, thinking everything is fine, when in reality you’re headed towards a business catastrophe.
KPIs offer unbiased, factual data that keeps you going in the right direction. They’re essential for getting results and keeping your business afloat.
Startups need KPIs because:
- They tell the truth: Founders can sometimes fall prey to wishful thinking. While thinking big isn’t a bad thing, you need to ground yourself with data. KPIs do just that.
- They help you make better decisions: Don’t float along without a detailed plan backed up with data. Get the facts in black and white to make decisions informed by your performance, not wishful thinking.
- They help you work towards your goals: It’s easier to achieve your goals when you know what they are. Actively measure and work towards your goals over time by tracking your KPIs.
Savvy founders choose KPIs based on their business objectives. This helps both you and potential investors get a clear idea of the company’s current performance and future. From there, you can use KPIs to pull the right levers and make the most positive change in your business.
But it all has to start with the right data.
5 startup KPIs—and how to calculate them
You have so many KPIs to choose from as a startup. In reality, you should only track 5 – 7 total KPIs, so you don’t dilute your focus. Get started by checking out these 5 effective KPIs and consider tracking them for your business.
- Gross burn rate
This is a financial KPI that measures burn rate as a percentage. Burn rate shows how quickly your startup is spending money. It’s a critical KPI to track if you’re reliant on investor cash because it shows how much and how quickly you need to raise funds.
How to calculate it:
(How much you spent in Month X) – (How much you spent in month Y) / (How much you spent in Month Y) X 100
Be on the lookout for KPI #2 next week. I will share a new KPI every week for the next 5 weeks. Also, check out Hollines.com for “Do”, “Don’t” and “Done Right” growth strategies, deals and transactions for Startup to Growth Stage companies.