Stage 3:
Metrics & KPI's
How will you know what good looks like in your startup?
Success measures and key performance indicators (KPI's) will provide you with assurance, and early warning if things aren't going to plan.
Purpose
Define key business success measures and KPI's.
Steps
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Identify measures of business success, or failure.
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Test your measures and KPI's with others.
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Review your measures and KPI's, then either:
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Continue.
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Refine.
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Find another idea.
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Set acceptable tolerances for KPI's.
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Think about how you'll measure business performance.​​​​
Target
​Business metrics that enable you to demonstrate success, or trigger intervention if your business isn't going to plan.
Define Business Metrics
Identify a few critical measures of business performance. Look particularly at the Key Metrics, Costs, and Revenue sections of your Lean Canvas.
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Choose measures and KPI's that will demonstrate success or problems with your business vision. Avoid detailed, low-level metrics.
Use the SMART Goals approach for your metrics: see Weblinks.
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Targets could include:
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Customers addressed/acquired/retained
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Revenue/Cost totals
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Marketing engagement
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Others, specific to your business
Test Metrics
Ask others, such as staff, business partners or supporters to review your metrics and KPI's.
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Encourage honest feedback to discover the strengths and weaknesses.
Ask questions:
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Are these metrics important to my business?
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How might they vary as my business develops?
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Are they specific and linked to a timeframe?
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Do they seem realistic and achievable?
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Make sure you record all comments.
Review Metrics
Based on the feedback you've received, is there anything you can do to improve your business metrics or KPI's?
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Refine your business metrics now.
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If changes are major, go back and test your metrics and KPI's again.
Define Tolerances
Your business is unlikely to perform as you predict.
Define the point at which business performance exceeds acceptable variation, and highlights a problem in your business.
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For each KPI, define upper and lower limits. These mark where you'll need to intervene, or perhaps adjust your business vision or plan.
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Intervention may be needed f your business is either unexpectedly successful, or performing poorly.
Define Tracking Methods
​For each measure, decide on the method you'll use to capture information to track your KPI's and tolerances.
For example, you might monitor cashflow against forecasts on a monthly cycle. This monitoring process provides a perfect opportunity to track progress against financial performance indicators.
Decide: Are You Ready For The Next Step?
Make a conscious decision about your business metrics and KPI's.
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If your metrics and targets haven't been well received by your reviewers, decide whether your business goals are realistic.
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If you're not likely to be able to achieve your targets, you should ask yourself if your new business can survive with lower performance. ​
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​This is the last time that you'll be asked to commit or quit. If you decide to proceed, the next stage is to Acquire Startup Funding needed to ready your business for launch.
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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.