How to

How to: define your startup’s key performance indicators (KPIs)

Digital Business Academy, Aspiring, Early Stage

Jack PreeceJack Preece, August 3, 2018

What is a KPI?

A Key Performance Indicator is a measurable value that demonstrates how effectively a company is achieving key business objectives.

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Why are they important?

KPIs are critically important not just to founders, but for the whole team. It is imperative to your startups success that the entire company is aligned towards the same KPIs.

Imagine a large rowing boat with ten people, if 3 people think the boat is heading left, 5 people think the boat is supposed to be heading right and 2 people think the boat is supposed to turn around. What happens to the boat?

What makes a good KPI?

Each business will choose how many metrics to focus on. There are hundreds of different KPIs to choose from. Tracking irrelevent KPIs will distract your focus on what really matters and stressing about numbers that have no real impact on the success of your company. In the early days, just having one metric could help you to stay focused.

Here are four criteria to help you pick a suitable metric that will really help you to make good decisions.

  1. Tie it to the product
  2. Measure as a rate or ratio
  3. Make it comparable
  4. Should be clear enough for outsiders to understand

Use this template > https://www.youtube.com/watch?v=2tuWjtc2Ifk&t=135s

You want some good examples?

MAU

Monthly active users: the number of people using your app/product website every month.

DAU

Daily active users: the number of people using your app/product website every month.

ARPU

Average revenue per user: how much money you make per user on your site.

For example, if you have 100 users who bring in 1000 dollars, the ARPU is $10.

CLV

Customer lifetime value.

For example, for a café owner, the CLV is the total amount of money they make from customers, from their first visit to their last.

Net promoter score

This is the average score you get from customers answering to the question ‘how likely would you be to recommend our product or service?’

Start now

While you are in the early stages of your startup, keep your KPIs simple and measure against them regularly to see your progress. You may get surprised at how fast you are growing…

As Christopher Hitchens once said ‘what can be asserted without evidence can also be dismissed without evidence’. Our Digital Business Academy has 4 courses focused on how you can measure the health of your tech startup, identify new opportunities and avoid bad practices with data.