The Importance of Goals and Metrics
October 02, 2017
By Jacob Drucker
Starting and running a business usually involves juggling more hats than a haberdasher. Reid Hoffman, the founder of LinkedIn, famously explained entrepreneurship in a more dramatic manner: “You jump off a cliff and you assemble an airplane on the way down.” Founders and early team members have more jobs than they can possibly accomplish, and all too often lose their bearings under the sheer number of tasks. One of the most important ways a startup can mitigate this risk is to set goals, and measure progress toward that goal.
This may sound obvious, but my personal experience tells me otherwise. When a company is still too young to have concrete metrics around customer acquisition and customer value, founders and early team members may not hold themselves as accountable to rough projections. This is a mistake for two reasons. It removes a degree of accountability, and removes the urgency behind building realistic projections. If you know you can’t possibly hit your projections for next month, it’s time to change the model.
Most good businesses have a number of Key Performance Indicators (KPIs) that they measure. Cost of customer acquisition, churn rate (the rate at which they lose customers), customer lifetime value, gross transaction volume: the list goes on, and varies from company to company. As we at Supply Clinic have grown, we’ve improved the metrics we measure, as well as our responses to them. For example, shipping costs per order grew faster than order sizes for a number of months in a row. We responded by reaching out to our sellers to lower shipping costs and improving the messaging throughout our website to better highlight ways to save on shipping. It may sound simple, but a young company hardly has the (wo)manpower to comprehensively complete everything on their to-do lists. KPIs force priorities.
As Antonio García Martínez put it in his book Chaos Monkeys, “You make what you measure, so measure carefully.” And if you don’t measure what you’re trying to accomplish, you can’t hold anyone accountable.
This is even true for enterprise sales, where landing a single client could take over a year, and serve as a windfall for the company. I’ve seen companies track the number of leads and meetings, weighted and sorted by quality. That enabled them to measure weekly and monthly performance, even if no new clients were signed. (Of course, it’s always important to ask why metrics are important. Some meetings are more important than others, so a single-minded effort to maximize the number of meetings might not be the best strategy. But not measuring it altogether would be just as shortsighted.)
At the end of the day, there’s typically one KPI which reigns above all others. For us, it’s gross transaction volume. For app companies, it could be the number of downloads. For some websites, it could be pageviews. Most other KPIs simply serve to maximize the one that rises above the rest.
What’s the single most important KPI to your business?
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