Don't Evaluate Yourself With Bad Metrics

Measure twice, cut once.

"How are things going?" is a question we ask one another to be polite. In the startup world, that question means something different. When an investor, share holder, business partner, or employee, asks that question they are asking, "How is the business doing?"

You are only as good as your metrics. No one cares about your opinion. To answer the question objectively you need to use your external data to support the answer.

Key performance indicators are metrics used to evaluate your current status. Other people have written about how to choose key performance indicators. The dogma of those articles is this: Your KPIs should be something that directly impacts your business. Something that moves the needle. A metric that increases the bottom line.

It is easy to choose a KPI that doesn't matter. KPI's that don't measure something of value and make you feel good - vanity metrics - aren't realistic to how the business is performing.

Choose good KPI's not bad KPI's:

  • How often do users use the product? Not how many people use the product.
  • How many free customers become paying customers? Not how many paying customers do you have.
  • How often do visitors come back? Not how many new visitors do you have.

Other Good KPIs include:

  • Do users recommend your product to others?
  • What is your viral coefficient?
  • How does the market feel about your product?
  • If I asked people who didn't know about the product to evaluate it, would they benefit from it?
  • When I tell someone about your product, do they go to the site immediately?
  • Do customers pull out their wallet to pay as soon as they hear about the product?

If you are embarrassed by any of the answers to these questions. Work on them. That's what your focus should be. Figure out why people aren't doing what they should be.

If you aren't measuring a KPI yet, determine with your team (investors and other share holders) what metrics you should be measuring.

Remember, no one, not even you, benefit from subjective responses.

Written: February 19, 2013

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