KPI's and Startups: How to Properly Identify Them

One of the most important things to consider when founding a business is that the work that you do initially is the foundation. Much like a contractor building a house needs to excavate earth and then pour concrete in to create the home’s foundation, what you are doing at the founding of your business is foundational for its long term success. What you figure out at this point will be critical. 

One such thing that will be important at the outset is establishing your Key Performance Indicators (KPIs). These categories will be crucial, since you will be able to look at them and determine how successful your business was the past week, month, quarter, year, etc. It is quite possible that you can even use these numbers to label your break even point, as well as even set goals (e.g. targeting a specific number in a KPI for the week, month, quarter, etc.)

Identifying KPIs are rather straightforward. While they vary from industry to industry, at the end of the day, they are numbers that have direct correlations to income. If you are a logistics company, then the number of customers serviced per day would likely be a KPI. If you are an automotive repair shop, then the number of vehicles you try to service in a given day would likely be a KPI.

You might look at this and notice that some jobs would take only a few minutes, while others might take all day. Would this not skew your results unnecessarily, thereby giving you faulty information? Yes and no. It could skew the data, especially if you have introduced a new service/product, or if you are just starting out. However, if you have had time to allow for things to average out, then no.

Analytics, a topic that will be discussed in a different edition of this newsletter, will go a long way in helping us iron out data that could skew results. However, I will say enough on this point that you should not be too terribly concerned about data messing up your KPIs; proper analytics will be able to come in here and, through the use of different variables and averages, help to eliminate results that would skew your information to the point that it becomes worthless.

Right now, your big concern is to identify the key indicators. Analytics will let you know how to interpret them later. You just need to identify them. Most likely, they will have some of the attributes listed below.

Core Offering: This item is either your primary product or service, or it is a part of the lineup.

Recur Regularly: There is a good chance that you will see this item recur substantially, making up a majority of your business transactions.

Standardized: There is very little variation with this product. It is an item that is possibly the most straightforward, easily explained, and easily achieved/produced items that you offer.

Could be packaged: You might find it relatively easy to package this item in some type of subscription offering (could be discounted as well.)

Obviously, you might not get all of the KPI’s right initially. In fact, there is a chance that some KPI’s might actually surface through analytics. However or whenever they surface, one thing is certain: the sooner that you identify them, the better, since you will have a clear target to aim for, both in breaking even as well as in expanding your business.

One final note: it is distinctly possible that your industry has benchmarks that will help you identify what your KPI’s need to be. If you have this luxury, then jump at this opportunity. There are many emerging industries where such benchmarks do not exist, and there is a great deal of trial and error. Of course, in these industries, it is possible to gain some insights with related industries that have developed enough that you can transfer their benchmarks, helping clearly identify KPI’s. One thing is crucial: it doesn’t matter how, figuring out your KPI’s as soon as possible is a must.