What is Your Key Metric
One founder I know asks the same question every day waking up and at the end of the day: what is my revenue today. One fatal mistake early-stage founders make is playing not making a strict decision regarding what they should measure. To some in the early days, it does not occur that it is critical to have a key metric and measure it rigorously in order to make progress. To others, it is a difficult commitment psychologically as well as execution-wise because once you have committed to a metric you have to achieve it daily and it limits your options to maneuver when you fail to achieve, which is not a good feeling. Because failure to achieve your key metric means you are not working hard or at times, it also means a lack of capacity. As a founder none of these feelings are enjoyable.
As a result, there are often many things to pursue and measure instead of one key metric. PR, expanding to new verticals, Facebook likes and followers, hiring new people, new partnerships, launching new features, so on and so forth. As you gloss over multiple metrics, you basically don’t track anything seriously. This could be fatal for most companies. If not fatal, it can meaningfully slow you down and make you bleed money in areas where you actually should not.
Say for example, if you are an early-stage company seeking product-market fit, one of your key metrics may be talking to customers and getting feedback to understand the fit. Now talking to customers can be a real discomfort. You particularly don’t like talking to people. And as an early-stage company, you are not a big team either. As a result, you look over that metric and instead focus more on building more features, which you enjoy doing, instead of asking your customers whether they need it or not. This could lead to serious problems such as you could end up building features that people don’t want and in the process wasting your valuable time and resources. In startups, time is of the essence.
As a founder, one of your critical jobs in the early stage and every other stage is deciding over an important metric and then setting up systems to track that metric relentlessly. If it is growing your users, that should be the priority you pay attention to. If it is growing your revenue, that is the priority you pay attention to. If it is building the product, that’s what you should think about 24/7.
In an interview with Future Startup, published in August, we asked Frontier Nutrition founder and CEO Eddie Bearnot what are some of the most important lessons he has learned in terms of growing a business that other founders can apply in their journey. Eddie’s reply was straightforward: “Pick the most important metrics for your success, measure them rigorously and religiously, spend time thinking about them carefully, and trust your conclusions,” says Eddie. “It is easy to let personal preference dictate strategy or to allow emotional attachment to make convenient excuses for poor performance.”
Most founders initially fail to decide on this metric. Even when they do have a metric, they at times stray away from the path and give into more easy and lucrative distractions such as seeking fame or building an audience or expansion or chasing vanity metrics and so on. “We are not pursuing growth at this point in time. We are building awareness.” That is not a good sign.
Setting a key metric is psychologically tricky and sometimes distressing. You are setting a key metric that means you are closing all the doors for you to avoid accountability. It means you are opening the door for you to fail and then called out for your failure. More importantly, progress often takes time. The road is a jigsaw and not a straight line. As a result, if you choose a metric, it will take some time to get started on it and see results. Moreover, there will be times when you fail to achieve that metric. In our minds, these are big problems. And this is why we are always in dichotomy about setting a key metric. We know it is critical. We understand it makes progress easy. We know unless we set a key metric, things could potentially turn out differently. But still, the mental block sometimes makes it hard to make the decision.
There is no straight forward remedy to this challenge of mental block. One reason we avoid it because it is so specific and once it is there we can’t avoid facing it. We know in our subconscious that we would sometimes fail to achieve our goal and when we have the metric, we know we failed it and it is a huge discomfort. Accepting this feeling of discomfort is key to establishing a more positive relationship with the idea of setting up a key metric. Accept that you will fail sometimes. Accept that it will not be comfortable. But also realize the fact that once you set up and commit to your key metric, it will keep you focused and motivated to push forward.
Not committing to a single metric is comfortable but it causes distractions. You could cheat yourself and pursue things that feel like progress but really don’t take your business forward. Committing to a metric means you know what your job is today, tomorrow, and the next week. It brings focus and speed. It clears off your to-do list. You know exactly what to do and what to avoid. It saves you both time and resources and hopefully your company from failure.
Ruhul Kader is a technology business and technology policy analyst based in Dhaka, Bangladesh. He is also the co-founder and CEO of Future Startup and author of Rethinking Failure: A short guide to living an entrepreneurial life. He writes about internet business, strategy, technology, technology policy, and society. He can be reached at [email protected]