5 Critical Metrics for Early Business Success
The foundation is the most crucial part of any project. Whether you're building a house, a relationship, or a new business, a strong foundation is your best bet for success in the future. Thankfully, it's easy to recognize some of the most essential components of launching and scaling a successful business once you’ve seen the process. Here are five measures that are critical to starting strong:
1. Market Driver
Ideas are what drive innovation. Some of the best ideas have become the most successful businesses to date. But an idea alone can't drive a company to success. Instead, one of the most crucial early actions when forming a business is to consider the numeric impact of an idea. In other words- the market driver. For example, let's say you do some research on a particular industry and find that the yearly cost of hiring developers is a considerable price point (believe me, it is). An idea might be that you can create a platform to minimize that cost. More importantly, the market driver is the fact that the cost of a service is x amount of dollars, and you can disrupt the industry by offering your service to do the same job at a fourth of the cost. So in effect, the market driver says that you have more than just an idea. You have the best way to accomplish a task and therefore it only makes sense for someone to use your product or service rather than pay four times that amount as they are currently.
When you burn something, you no longer have it. Sadly, the same goes for money, and in the early stages of a business, cash is scarce. That's why tracking your funding burn is so essential to making decisions, budgeting, and scaling. By monitoring your burn, you can see exactly how your funding will be used over a given period. For example, with a dynamic spreadsheet, you could see that x amount of money will pay for the founders' salaries each month, y amount would cover developer costs for each month, and z amount would pay for your business location's rent each month. These are all high costs to consider, and by tracking your burn for your investment horizon, you can see exactly how much funding will go to each location, and how tweaking those amounts changes how much of your investment you use.
Customer acquisition is key to growing and scaling a business. Keeping these customers is equally important. Gaining a customer means revenue, but keeping that customer for months or even years means more revenue. See where this is going? Churn is the rate at which users stop using your platform over a given time. Using churn, you can more accurately predict the lifetime value of customers. You can also see that you need to make changes to keep customers for a more extended period.
Of all the aforementioned metrics, growth is one that pretty much everyone will recognize as being extremely important. How do you reach profitability? Growth. How do you reach your initial market goal? Growth. How do you meet investor expectations? Growth. The larger the market is that you control, the more revenue. Marketing is an essential feature of any business plan, but for startups, it's vital for sparking growth and widening your market. In essence, growth is both an ever-changing goal for the future of your business and a measure of how successful your marketing and product/price points meet up. If you aren't marketing effectively, then you might not be getting enough market growth. Alternatively, you could just need to adjust your pricing model to better meet customers' willingness to pay. Either way, growth is an essential percentage in helping you understand your success as a new business and in meeting the expectations of the people funding your operation.
5. Graph of Projections
Just as with growth, having a graph of different projections will be necessary to convey your business's expected scale. If you plan to reach profitability two years from now, the projections graph will show how all your costs and sales will result in that supposed profitability at that time. If you plan to meet specific market goals numerically speaking, the graph of projections can show how much market growth has to occur to reach that goal. Depending on the particular product or service that your business offers, you can add many different relevant numerics to your graph of projections. In terms of securing investor funding and monitoring business growth at the same time, nothing is more critical than a graph of projections for visualizing the goals of your business and conveying it to others.
The more you can explain the inner workings of your business in terms of numbers, the better you can monitor your business personally as well as impress investors and customers. It might not always be fun to crunch numbers and fill out spreadsheets, but the work pays off every time. If only you could build out these practices automatically when you create your application. Wait…., can you do that already?