I have a preference for measuring the One Metric That Matters (OMTM) after reading Lean Analytics, which I wrote a review of here http://kevinkauzlaric.com/lean-analytics-book-review/. This helps to get to the core of what an entrepreneur should be looking for among reams of data.
As an entrepreneur, getting your start-up off the ground was no small feat. But even after you’ve been in the trenches for a couple of years, how do you know that your business is gaining momentum? How do you know that the idea you’ve invested everything into is going to be around for the long run?
The answer is simple: numbers. Numbers (and not necessarily revenues) are the heartbeat of any business. Tracking and measuring the data your business puts out, combined with regular analysis and adjustment, can put your business on a steady road to success.
Here are five steps to take on a regular basis to assess the success of your start-up.
1. Measure Everything, Even the Weird Stuff
Everything can be measured, but I recommend grabbing the low hanging fruit first. This includes easy-to-track numbers such as revenue, website hits, and Facebook likes. These are no-brainers. From there, look at the out-of-the box indicators that are unique to your business.
One of the unusual things I like to measure is office morale. To keep energy high around the office, we have a few arcade and table games that employees can play to take a quick break. The games were purchased for fun, but they actually generated some interesting data for us, too: We set up a simple device to measure when the games are active, then came up with a couple of hypotheses for how we could correlate game usage with overall productivity. If employees are spending more time than usual playing PacMan, does that mean that stress levels are low and productivity is high? Or does it mean that things are slow in the office and we need to push more features? The only way to really find out is to track the data, compare it to some other key performance indicators, and see what the answer is. As it turns out, more PacMan actually means more efficiency for us.
Every business is different, but the key is to look at your business and decide what the most meaningful indicators are for you.
2. Set a Baseline for Everything You Measure
You won’t know if you’ve made improvements unless you know where you started. If you’re just starting to track things in your business, you may look at the numbers and think, “Uh oh, this is bad,” or, “Oh yeah, we’re doing great!”—but you won’t know how you’re actually doing unless you continue to track and look at the data over time.
It’s important to remember that there are tons of variables that can affect the way your data looks at any given moment. As a best practice, take note of the variables that are present when you gather your baseline. Were you in the midst of an ad campaign? Did you recently have a grand opening? Was there a holiday? What was the weather like? Being aware of and documenting these details will help you make better assessments when comparing to your future data.
3. Set Some Smart Goals
After you set your baseline and start measuring, you’re on the right track, but you still have to know where you want to go. The obvious goal is to increase revenue, but by carefully tracking data, you may find that there are smarter goals for you to aim for.
At my company, ShortStack, we had a standing goal of increasing signups when we first launched. Soon, we began tracking cancellations, and we found that decreasing cancellations was a better goal for us to focus on than constantly pushing for new users. The reason: Cost-per-acquisition is higher than the cost for keeping existing users. Plus, keeping existing users happy helps create loyalty and increases the likelihood that they will recommend our service.
4. Interpret the Data and Make Adjustments
It won’t do you any good to get baselines, set goals, and track data if you never look at the information to see what it’s telling you. After a few months of tracking, you’ll start to see trends or things you can adjust. You may find that there’s more than one road to increasing profits or amping up your business.
I’m a huge fan of Geckoboard for tracking. You can integrate Geckoboard with a ton of platforms—including Pinterest, Chargify, Etsy, Eventbrite, Facebook, and Twitter—and use it to monitor social networks, sales, server uptime, and a variety of other metrics. The best part is that all the stats are in real time, so you can see spikes in your data and react quickly. We have a big TV in the office that is dedicated to displaying our Geckoboard, so we can always keep an eye on the data.
You can use this process for non-web data, too. For example, if our PacMan data shows that employees are playing less, it might be an indicator that their workloads are too heavy. Monitoring the data helps us refine our project management and prevent burnout before it happens.
5. Be on the Lookout for New Things to Measure
Your business is constantly changing, and so should the things you measure. If you discover something new that might be useful for you to look at, add it to your tracking list. If you see a measurement you thought was cool or useful at the beginning but you’ve determined that the data isn’t useful, then stop tracking it. Change things up periodically so the data doesn’t stagnate.
When ShortStack first started out, one of our main KPIs was our overall user count and how many new subscribers signed on with us each day. We soon realized that we needed to be tracking not only how many users we had, but also where they were located. That data allowed us to add features such as multiple language support and location-based customizability.
As a business owner, it’s easy to get so caught up in the daily whirlwind of tasks that you forget to take a step back to see if you’re moving in the right direction. But for a start-up, getting an aerial view of what your business is doing is crucial—not only to ensure your survival, but also to set you on the road to long-term success.