How to Set KPIs and Goals

#startup #metrics

What is a Key Performance Indicator?

We will define KPI as metrics those indicate how well you business is doing.
Setting the right KPIs helps you understand if you are doing ok/good/bad. It help not only prioritize the time but also correct the direction.

What are the right KPI to set?

Primary metric

You can chose one metric as a primary one. It makes you focus on it.
There are 4 characteristics of good metrics:

• Represents delivery of real value. You want track how much you help users.
  • Revenue. Money are always good to track.
  • Time.
• Captures recurring values
  • Monthly Recurring Revenue
  • Daily Active Users.
• Lagging indicator
  • A lagging indicator is a financial sign that becomes apparent only after a large shift has taken place.
• Usable feedback mechanism
  • Help you to prioritize the direction.

So there are 2 main characteristic you can choose between:

• Revenue
• Daily Users

The common trap is to pick revenue and not getting paid. Free users give the different type of feedback and probably will be more serious.
If you are a marketplace and you have both guest and host (for AirBnb). For Uber you have clients and drivers.

There is one exception. If you run a bio and hardtech businesses, then it takes a lot of time and money to get to market. Prove that if you build it people will come. Figure out the milestones you need to achieve.

Secondary metrics

Select 3-5 other metrics to pair with the primary metric. It depends on the business.

• NPS
• TVC
• Referral rate
• Payback period
• GMV

The best KPI for an unlaunched company

You need to find the primary metric before launching to understand your first users.

Setting metric-based goals

The goal of the startup is to grow the primary metric. Build something lots of people want. Reach and serve all those people.
Set weekly % growth goal.

How fast should I grow?

There is no right formula, one angle is to check other startups. 10% a week is very good. It is doable if you have what people want.
You know your area better, you can define what success looks like.

Guidelines for defining a goal

• Fast initial growth
• Time to sale
• Organic vs paid
  • You should avoid paid in early days.
• Exponential vs linear

Pick a growth rate. If you reach it consistently then increase it. Otherwise understand why not.

Tracking Progress

Use this as a motivation. Draw the graph you want to achieve, print it, put it everywhere.
You want to leverage your primary goal. One day you won't hit your goal. It's okay if you understand why. If you don't know the answer then go talk to users.

Just tracking the progress and setting up the weekly goals will improve things dramatically.