Why business metrics are critical for startups
Being an entrepreneur is not easy. While you may have set yourself a huge goal to achieve, the nature of the journey is such that you’ll have more to handle than you ever imagined.
As a result, without even realizing it, you can end up getting distracted from your end goal. And that’s where business metrics come to assume a key role for your business.
It is very important to develop metrics to monitor your progress right from the start because once your focus shifts towards building up the team and product, or chasing funding, such things are likely to take the backseat. But considering the role these metrics play in helping you realize your vision, you should never lose sight of them.
Business metrics are an indicator of the startup’s performance and play a vital role in driving you to reach your goals. They serve as the yardstick against which you can measure your performance across a wide range of parameters that are critical for the success of the startup and help pinpoint exactly where your strengths lie and the areas where you need to improve.
This can help you take concrete steps in order to minimize any deviation from the course you’ve laid down to realize your vision and ensure you get there faster. There will, of course, be hits and misses along the way, but the business metrics will ensure you don’t lose focus of your long term goal, and continue to make regular and rapid progress along the way.
Without these guiding parameters, it is very easy for a start up to descend into vagueness and chaos. The metrics guide the team of a start up towards a common goal and establishes a clear plan of action on what really needs to be done and is critical to the company.
Metrics also prove to be extremely productive in guiding a team towards consensus based on facts without allowing any room for discord. Even new hires can benefit from getting such clear and specific guidelines for functioning and can, therefore, integrate swiftly into the momentum of the startup.
For a startup, or any business for that matter, the most important key metrics are sales metrics, customer metrics and finance metrics. Each of these areas have further multiple performance metrics, all of which may or may not be needed as per the demands of the business. With these figures, one should be able to tell whether the business is making any profit or not, or whether the customers are happy and will keep coming back for more, where you need to grow and how far will the money go.
With these figures, one should be able to tell whether the business is making any profit or not, or whether the customers are happy and will keep coming back for more, where you need to grow and how far will the money go.
With such data available, a startup can compare itself to other companies of similar size and level that are operating in the same category and see where they stand. Constantly leveraging the latest data can help startups discover new avenues for business expansion and creation and stay in the running for more funding.
In fact, metric driven companies are more likely to be picked up for funding, since it means the founder(s) have seriously thought through how they want to achieve their long term goal and monitor their progress from time to time to see where they stand viz. a viz. their goals.
As a result, they are likely to perform better than others startups that are not driven by business metrics. Moreover, it is easier for investors to evaluate the startup based on this data to assess how far the company will go, thus making it easier for them to decide whether or not they should put their money in it. Without focus on metrics, the founders can neither create value for themselves nor for their investors.
To sum it up aptly, Peter Drucker, management guru, once said “If you can’t measure it, you can’t manage it”. So, regular data monitoring and analysis is no longer a choice but a necessity for startups to stay relevant in today’s ever changing times.