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Stage 3:
Metrics & KPI's

Guide to making the most of the Toolshed Framework Metrics & KPI's stage.

This is the stage where you work out what your business targets are and how you’ll measure them.

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This critical step helps you to see when you’re realizing your startup vision, or when you need to intervene, should your business be going off track after you’ve launched.

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Objectives

​The objectives for this stage are:

  • Identify important measures of business success, or failure.

  • Set targets and tolerances for each measure (KPI's).

  • Test your measures with others.

  • Identify how you'll track your measures.

  • Either continue with your measures, refine them, or find another idea.

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Design your measures

Before choosing any measures, review the Key Metrics, Costs, and Revenue sections of your Lean Canvas. Some obvious measures should stand out.

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Select only top-level metrics that will demonstrate success or problems with your business plan. You'll define and monitor many others at a more detailed level later, when your new business is operating.

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Define your targets

Think about each of your measures and how they will vary as you build, launch and grow your business. By making a few assumptions, you’ll be able to set achievable targets for each measure. They'll vary over time as your business develops, so your targets will also change. Be aware of your assumptions, and document them alongside each measure.

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It may help if you draw up a cashflow forecast for your first three years, month by month for the first year and a total for each of the next two years. A template is available to help you with this.

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Define your tolerances

In an ideal world, your business will align with your targets as it progresses. If it performs badly, select a measure that reminds you to review your plans. You may also need to review your plans if you find your business performs much better than you forecast,

 

In either circumstance, at what point do you need to intervene?

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You don’t have to think about what intervention you’ll take right now, just identify how you'll know that intervention is required. Set tolerances above and below your targets that remind you to intervene in your new business. Once your business is operating, you’ll probably find that you're so wrapped up in the detail of your business that you may not notice that i's going off track.

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Define your methods

Finally, work out how you’re going to track your measures.

For example:

We recommend that you track your cashflow at least every month. If you do, it’s the perfect opportunity to check progress against your financial measures. Think about the mechanisms you'll use to track each of your measures.

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Using this phase

On the webpage, the stage is broken down into several steps, with each step containing:

  • A description of the step and how it works

  • Learning resources like guides, blog posts, templates, or tools that can help you with this step. 

  • Links to resources elsewhere on the web that can help you with the step

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We recommend that you follow each step in turn and use the resources that most suit how you like to work.

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Conclusion

The objective of the Measures and KPI's phase is to provide you with a method to govern your business. The measures, tolerances and tracking methods you’ve designed will trigger course changes to help your business respond at times when your assumptions and estimates are being challenged.

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Testing your measures is an important step in this phase. We recommend that you check them with other people who’ll provide you with an external perspective before you proceed.

 

The decision you make on your measures is critical, as it's the last formal decision point in the Framework before launch. If you choose to commit, go to Acquire Startup Funding.

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​Quitting now is not a failure, it's an opportunity to try something else while you still have energy and resources to spare

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We want to make your start-up journey enjoyable, successful, and as easy as possible. If you find any aspect of the site confusing or lacking, please adviser us on our Contact Form and we'll improve it.

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Finally, if you’re feeling lost, head to the Toolshed Community Forum, and get some help from a fellow founder or an expert mentor.

Enjoy measurable success

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