Scorecard. KPI - Key Performance Indicator of a startup

SCORECARD.

KPI - KEY PERFORMANCE INDICATOR STARTUP METRICS

Accelerate your business with these expert tips "KPI - Key Performance Indicator startups metrics". KPI - Key Performance Indicator metrics for startups". Analyse and discover this TIP!

KEY PERFORMANCE INDICATOR OF A NEW COMPANY

Key Performance Indicators (KPIs) are key performance indicators that measure a company's performance against set objectives. In the case of a new company, it is important to choose the right KPIs to measure its progress and success in the different key areas. It is important to choose KPIs that are aligned with the company's objectives and strategies, and that allow you to measure your progress effectively in order to make informed decisions.

Why are KPIs important in a start-up?

KPIs are important in a start-up because they allow the company's performance and progress against its objectives and goals to be measured. They serve as a tool to identify areas for improvement, make informed decisions and adjust the strategy as necessary to achieve the set objectives. In addition, KPIs help to keep everyone team members are focused on the same goals and foster a culture of continuous improvement in the company. In short, KPIs are an essential tool for the success and sustainable growth of a start-up.

What is the advantage of using KPIs in a new company?

One advantage of using KPIs in a start-up is that it allows the founders to make decisions based on concrete, objective data rather than on assumptions or intuition. This can help improve the efficiency and effectiveness of the company by enabling early identification of problems and opportunities for improvement, as well as maintaining a focus on important objectives and goals.

What is a good periodicity for measuring KPIs in a new company?

The periodicity for measuring KPIs in a start-up can vary depending on the type of metric and the business model, but a monthly frequency is generally recommended in order to have a clear and consistent view of the company's performance.

However, in some cases it may be necessary to measure them on a weekly, fortnightly or even quarterly basis. It is important to establish a periodicity that allows sufficient data to be collected to make informed decisions, without being overwhelming or inefficient.

The importance of measuring and using appropriate metrics in a startup in order to make informed decisions about the business model. Often an adverbial metric is used, which consists of describing the performance of a functionality with vague terms such as "a lot" or "quite a lot", which is not useful for making accurate decisions.

It is important to choose the right metrics and to work with an appropriate time period that is in line with the business model and its business units. Often, the mistake is made of focusing on superficial metrics, such as visits, instead of measuring more important aspects, such as retention. Ultimately, What matters is that the same metric is used consistently and that it is compared to other periods in order to make decisions based on the evolution of the metric.

A dashboard can be very useful in this regard. We usually work with an alternative metric system: the adverbial metric system, and when we are asked if a new feature has contributed to improve retention we say: "a lot", "quite a lot", "a lot", "a lot"... etc. A bad strategy. In order to make decisions about how our business model is working we need good metrics.

SOME CONSIDERATIONS ON THE IMPORTANCE OF MEASURING

The problem is that we often think that we don't have time to measure, that this is something for the bigger companies... or worse, we choose bad indicators or focus on ego metrics that per se don't help you make decisions (such as visits).. We have to be clear that metrics are the basis on which to make decisions in a startup. (making decisions based on a hunch is usually a bad idea), and which will decide for example if our tooth recruitment strategy is working well or if the new feature we have introduced in the project is working well.

Last but not least, we must choose a good time period to work on our metrics, something that is not often discussed and that is intrinsically linked to our business model and its units economics: although by default and for most people a monthly periodicity is enough, there are times (at the beginning) or business models where it makes more sense to decrease the frequency (weekly) or increase it (bimonthly).

The important thing is that we understand that it is not so important that the metric is perfectly constructed and that its results are adjusted to the thousandth, as it is that we always use the metric in the same way... since a scorecard above all has COMPARATIVE value, and serves us to make decisions IN COMPARISON with another period. 

What is the difference between unit economics of the business model and kpi?

The main difference between Unit Economics and KPIs lies in their focus and objective:

Unit Economics focuses on the financial aspects of a company's business model, and its objective is to determine whether each unit of product or service that the company sells is profitable. To do this, the costs and revenues generated by each unit are analysed in order to determine the net profit obtained. On the other hand, KPIs focus on measuring a company's performance and progress against its strategic goals and objectives. Therefore, KPIs can cover a wide range of aspects, including customer satisfaction, social media reach, sales conversion rate, customer retention, among others.

In a nutshell, While Unit Economics focuses on the financial performance of a product or service unit, KPIs measure the overall performance of the company in relation to its strategic goals and objectives. Both are important for a new venture, as they provide key information for decision making and business success.

KEY METRICS OF A STARTUP 

The key metrics of a startup are.

SOME EXAMPLES OF KPIS FOR A NEW COMPANY COULD BE:

  1. Total sales: revenue generated from sales of products or services.
  2. ACTIVATION (see+ TIP).
  3. RETENTION/ENGAGEMENT (see+ TIP). Customer retention: percentage of customers who continue to use the company's products or services over a given period of time.
  4. Churn rate: customer churn rate. CHURN (see+ TIP).
  5. Customer Acquisition Cost (CAC): cost of customer acquisition. CUSTOMER ACQUISITION COST (CAC) (see+ TIP). 
  6. SOURCE ACQUISITION (see+ TIP).
  7. Lifetime Value (LTV): customer lifetime value. CUSTOMER LIFECYCLE VALUE (LTV) (see+ TIP) 
  8. Monthly Recurring Revenue (MRR): monthly recurrent income.
  9. Contribution margin. Gross Margin: Gross margin.
  10. Burn rate: the rate at which money is burnt. CASH BURN BATE (CBR) (see+ TIP)
  11. Runway (see+ TIP): time left to run out of money.
  12. Conversion rate: conversion rate of visits into sales. CONVERSION (see+ TIP).
  13. Average Revenue Per User (ARPU): average revenue per user.
  14. Net Promoter Score (NPS): level of customer satisfaction and recommendation. Customer satisfaction: surveys or ratings that measure customer satisfaction with the company's products or services. Number of customer complaints or claims.
  15.  CAPTIVITY RATIO CAPTATION (see+ TIP)
  16. Advertising Effectiveness Ratio: measures advertising effectiveness and return on investment (ROI).
  17. Return on Investment (ROI).
  18. Return on equity ROE.

VERY USEFUL METRICS FOR COMPANIES THAT ENGAGE CUSTOMERS DIGITALLY:

  1. Web traffic: number of visits to the company's website.
  2. Cart abandonment rate: percentage of users who abandon the purchase process before completing it.
  3. Average customer dwell time.
  4. Shopping cart abandonment rate
  5. Customer renewal rate
  6. Number of visits to the website
  7. Website bounce rate
  8. Website loading time
  9. Email open rate
  10. Email click-through rate
  11. Number of followers on social networks
  12. Social media interaction rate
  13. Employee retention rate
  14. Average time to fill a vacant position

ChatGPT can help you calculate key metrics for a new business by providing information and advice on how to define and measure these metrics. For example, if you want to calculate the conversion rate of visits to sales, you can use web analytics tools such as Google Analytics to track visits to your website and conversions to sales.

If you want to measure the cost of customer acquisition, you can review your sales and advertising records to calculate how much it costs to acquire a new customer. Overall, ChatGPT can help you understand how to select and measure the right key metrics for your business and how to use that information to make informed decisions about business growth and success.

Define the scorecard by selecting the most appropriate KPIs for your new company.

List of possible KPIs that may be relevant for different business areas:

  1. Sales: total sales, sales per channel, sales per product, conversion rate, average ticket.
  2. Marketing: customer acquisition cost, customer retention rate, conversion rate, marketing ROI, web traffic.
  3. Finance: revenue, gross margin, cash flow, cost of goods sold, net profit.
  4. Operations: production efficiency, cycle time, lead time, production defects, mean time to repair.
  5. Human resources: staff turnover, absenteeism rate, job satisfaction, productivity, cost per employee ratio.

Remember that it is important to choose KPIs that are relevant to your business and measure them regularly (monthly) in order to make data-driven decisions and improve business performance.

Characteristics of KPIs

They should correspond to the acronym SMART:

  • M for Measurable - To be measurable: in physical or monetary units. Similarly, all data referred to in the KPI must be accurate, consistent and credible.
  • A stands for Attainable - Quantifiable o attainable: it must be achievable.
  • T for Timely - Newspaper o temporal: i.e. it can be "tracked" periodically. In this way, we ensure that the data to which the KPI refers is available at the time it is set, whether daily, weekly or other time period.
  • S for specific - SpecificThe KPI can be narrowed down to a single relevant aspect. In this way, the information referred to in the KPI can be easily accessed and extracted.
  • R for Realist - Relevant: must be a factor that really influences the business model, and if this variable gives negative results, we must act quickly. Here, it is necessary that all the data to which the KPI refers are automated through computer programmes.

Types of KPIs

Each business needs specific KPIs.

DEPENDING ON THE TYPE OF COMPANY AND SECTOR OF ACTIVITY, THERE ARE A NUMBER OF SPECIFIC METRICS THAT FACILITATE THE ACHIEVEMENT OF CERTAIN COMPETITIVE ADVANTAGES:

  • SALES KPI
    • Addressed to convert into sales and invoice for a specific service or product. This measurement can be made up of around 30 indicators to monitor sales (customer satisfaction, commitment and motivation of the sales team, etc.).
  • SOCIAL MEDIA KPI
    • They are of great value when you want to know the paid or organic impact of your posts on social networks, as well as the participation and influence they have on the return on investment. A parameter that will help to understand the performance and what these channels contribute to the development of the company.
  • KPI RETAIL
    • Designed for increase sales and reduce costs in textile shops and the consumer sector.
  • LOGISTICS KPI
    • Specific for calculate the performance and the level of optimisation of the different business processes (improving quality, increasing productivity, minimising errors, etc.). They are the basis for continuous improvement within an organisation.
  • PRODUCTION KPI
    • Related to the above and fundamental to to promote the continuous improvement of production processes of the company.
  • KPI FINANCIAL 
    • Focused on a growth strategy, cost reduction, profit increase and asset optimisation.
  • KPI DIGITAL MARKETING
    • They assist in the measuring the performance of lead generation operations, conversions in each campaign, influencing the target audience, the impacts of a banner... And where it is important to know what each action does. Therefore, each indicator in digital marketing must be accompanied by a specific value that helps to choose the different channels available to reach the customer.

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Jaime Cavero

Presidente de la Aceleradora mentorDay. Inversor en startups e impulsor de nuevas empresas a través de Dyrecto, DreaperB1 y mentorDay.
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