The first step in building an assessment framework that you can trust is to pick the right Key Performance Indicators (KPIs).
KPIs are the metrics you measure that tie directly to the goals you want to achieve. In the case of a startup, your goal is profitable, scalable growth. The challenge is in picking the right KPIs. The danger is in being led astray by KPIs that don’t actually measure your progress toward your goals.
Choose The KPIs Most Closely Aligned With Your Goals
If you want to lose weight, what’s the best KPI to measure your progress?
Height? Certainly if you are growing taller, or somehow getting shorter, you might gain or lose weight. However, as we learned when Mike Teavee was stretched in the taffy puller at the end of Charlie and the Chocolate Factory, it’s possible that your height can change without a change in weight.
The fit of your clothes? As you gain or lose weight, your clothes will fit differently. But perhaps your clothes shrink in the wash. Or your clothing is stretching out over time as you wear them. You may have even found that one clothing brand where the sizing fits just a bit looser than ever other brand, tricking your mind into thinking that you’re successfully maintaining your weight.
We all know the answer. If you want to lose weight, the best KPI is your weight!
If you track your weight regularly, you’ll have a record of your progress in trying to lose weight.
Focus Your Initial KPIs on Finding Product Market Fit
Similarly, you need to choose the right KPIs to ensure you are building a startup that can deliver growth and profitability. If you pick the wrong KPIs, you’ll get false positive signals, and you’ll run out of cash even as the metrics you are staring at suggest you’re making progress. We’ll talk about the pitfalls of vanity metrics, and the difference between goals and tactics, in a future post.
You want your initial KPIs to be focused on finding product-market fit. As your company grows, you can expand the pillars of execution you are measuring. Early on in your startup’s development, 3-5 SMART Goals measuring KPIs targeting the search for product-market fit will be all you need.
What is product-market fit? And what are some of the KPI’s we can use to find it? We’ll cover that topic in the following posts.
What Is Product-Market Fit >