How to Drive Your Startup with just 2 North Star Metrics

  1. The KPI is too remote for employees to directly influence. For example, drive up ARR or bring me more sales. How does the average employee in the organization actually impact that?
  2. There are way too many KPIs. We have to remember, KPI stands for *key* performance indicator, not just any old performance indicator or anything you can measure for that matter. Know what are the key performance indicators. In other words, there is a prioritization exercise that we need.
  3. Very common, we have silo KPIs. Here are the marketing KPIs, here are the engineering KPIs and here are the product KPIs and so forth. But who actually looks at whether the business overall is performing? Nobody.
  4. Many KPIs are being measured, although they’re not actually part of the core business model of the company. For example, a company that is completely in growth phase, just raised a series a, and the Finance person is very worried about the profitability. There are many other examples where that came from.
  • Facebook, the impact metric or growth metric is the number of user minutes. Their earnings metric or efficiency metric is the revenue per user minute.
  • Google it was: growth metric = number of clicks, efficiency metric = profit per click.
  • Rocket Fuel it was number of campaigns. Then gross margin per campaign.
  1. If you’re very early, the only earning that may matter is simply revenue per user, or per product, or whatever your impact metric is.
  2. A little bit more down the line, gross margin becomes important.
  3. A little bit down the line, we start looking at margin after sales and marketing.
  4. And then over time at operating margin
  5. Only when the company is really mature, do we start looking at earnings before interest and taxes, maybe even return on invested capital.

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