“When performance is measured and reported, the rate of improvement accelerates.”

- Thomas Monson

 

Key Performance Indicators (KPIs) and Goals are essential for any business to help evaluate the success of an activity in a particular organization. But what are KPIs and goals? KPIs are NOT the same as goals. Goals are the outcome you hope to achieve while KPIs are the metrics used to let you know how efficient you are in achieving your goals. To further explain what KPIs are, we can first eliminate what are NOT KPIs according to Auston Bunsen (CTO and Cofounder of QuickNode). KPIs are not vanity numbers like:

  • The amount of money raised
  • The number of page views on your website (vanity metrics)
  • Number of followers
  • Number of downloads

So, what is a KPI? The definition of a KPI is a “measurable value that demonstrates how effectively a company is achieving critical business objectives” (Auston Bunsen). Essentially, KPIs will tell you if the company or business is doing well or improving. KPIs are used to set goals and help motivate the company and its employees to reach certain goals. These KPIs and goals become helpful when analyzing improvements in different aspects of the company year after year. In addition, KPIs make splitting the work a lot easier since each KPI is designed for specific aspects of a company.

For early-stage companies that make less than $1 million in annual revenue, Auston suggests KPIs to follow the acronym AARRR – Acquisition, Activation, *Revenue, Retention, and Referral. The following chart below showcases what Auston believes are key numbers for any startup firms should have:

Acquisition: the act of getting someone to sign-up for your product or service.

Conversion = # of ppl signing up / # of people visiting your app

1-10%

Week-over-Week Growth (WoW): new customers, retention, etc.

5%

Month-over-Month Growth (MoM): new customers, retention, etc.

20%

Activation: getting someone to use your product or service for the first time.

Conversion for Daily Active Users (DAU) and Monthly Active Users (MAU)

60%

*Revenue: getting someone to pay you money for your product/service.

Month-over-Month Growth (MoM)

20%

Retention: getting someone to stick with your product or use your product or service repeatedly.

Customer Retention = (customers at the end of period – new customers in period) / Starting # of customers

95%

Net Dollar Retention (NDR): (ARR + Upgrades – Downgrades – Churn) / initial ARR

Annual Recurring Revenue (ARR) = Monthly Run Rate (MRR) x 12

100%

Referrals: getting someone to recommend your product to someone else.

K Factor = (Customers * # of referrals per customer * conversions rate) / 100

Over 1

“KPI is not only about driving the business, but very much also about driving execution and making sure that your team is ultimately delivering at their maximum capacity” (Claudia Woods).

Not all KPIs and goals are number driven. Claudia Woods (CEO of WeWork LATAM) emphasizes that it is important to know how the whole company acquisition contributes to the KPIs. This is done by knowing who is responsible for each specific KPI or goal and the roles that are involved. It is more about managing people and knowing which people to bring to bring to meetings, evaluate projects, evaluate performances etc.

Questions that you should NOT be asking:

“Why am I doing this?”

If you are asking this question and cannot connect that activity to a certain KPI or goal, then it is most likely not the right KPI or goal to be focused on.

KPIs and goals need to be co-created for example with marketing leaders inputting ideas and opinions towards the goals. This further leads into the idea of people not only focusing on their division but as an entire business. As a teaching lesson she gave out, activities have to split into project and pillars when dealing with projects, KPIs and goals.

1)     People

Who are the team members? How do you keep them involved?

2)     Share of voice/ market share

What is your business? What is being done to achieve X market share?

3)     Retention

Retain your customers

4)     Operational Efficiency

Are you efficient in the given sector you work with?

5)     Sell! Sell! Sell!

Make sure to combine the human aspect of selling with the digital aspect (i.e online advertisement

6)     Find the money

Find the inefficiencies within in the company to save money but in a smart way

7)     New Revenue Streams

Find new revenue streams through diversification.

KPI’s and goals are easier said than done. Having these certain parameters is hard to achieve but with adequate support, guidance and everyone within the company aligned, KPI and goals would lead towards the correct path for any companies especially with startups and entrepreneurs who are looking to create a business.

 

This post was written by Nicole Samaniego and Jeffrey Camp. Ms. Samaniego was a member of Cane Angel Network investment team and graduated with her MBA from the University of Miami in May 2022. Mr. Camp is the Managing Director of the Cane Angel Network.