Does One Size Fit All ? — P3

Have you ever wondered what if only one clothing size –“M” was available, how would it be like for most of us?

People belonging to XS, S, L,XL category ,i.e. 80% of the world would be uncomfortable, assuming there are 5 sizes.

As we come in different shapes and sizes, to match our requirement, we get everything in several sizes and forms.

Similarly, companies introduce their products in several sizes/range/color/fragrance/flavors and so on, to match consumer’s individual preferences and requirements, convenience and suitability.

That is, there is no panacea for multiple issues! Every issue, every challenge has to be analyzed and resolved individually, taking a customized approach

Start-up world

In this fiercely competitive and often saturated market, start-ups come out with unique propositions, disruptive technologies that either address a current problem or find a new solution to existing solutions.

In doing so, one of the key steps is identifying the right target audience and finding the right market fit for their product, because no one size fits all. Or does it?

Monitoring of start-ups

As a start-up progresses further in its lifecycle, dynamics shift and priorities change. However, at every stage , compliance and corporate governance remains the common thread, taking a more significant role as the start-up evolves in its journey.

Monitoring compliance and governance does not imply surveillance of activities. Compliance is akin to tracks or rails on which the “train” of business can run smoothly, so monitoring is necessary to ensure that the “train” runs on track and does not derail.

Several parameters are employed to assess the business and financial health of the start-up.

Some key metrics such as revenue, profit, cash flow etc. are common across all stages of the lifecycle-from seed stage to maturity and spanning all industries, from manufacturing, trading to services.

However, just as one size does not fit all, same metrics cannot be applied to all the entities alike.

Different stages of growth

An early stage start-up typically faces several challenges; To begin with, it operates with limited resources, both financial and human, hunts the right market fit for their products, endeavors to acquire customers, face regulatory hurdles etc.

This underscores the significance of constantly monitoring the progress, to gauge what works and what does not, on a real time basis, so that the entity can pivot and adapt quickly before it crashes out.

Thus, it is imperative to do a preventive health check on the operations of the entity before an entity turns sick (literally!). Some of these tests and checks used are –

• Burn rate
• Monthly active users
• Conversion rate etc.
• Customer Acquisition Cost (CAC)
• Customer Retention Rate and Churn Rate (how many customers stopped using the service)
• Monthly Recurring Revenue

On the other hand, a mature start-up or at an advanced growth stage will also look at –

• Revenue growth rate
• Net Profit margin growth
• Market share –within a segment/industry/geography
• Employee attrition and retention rate
• Brand equity etc.

For a manufacturer, since the processes are relatively more standardized and predictable, following metrics work –

• Production Output –e.g. how many laptops produced in a month ?
• Inventory management- e.g., how many finished laptops are lying unsold? What is the cost of storing and holding these laptops? How quickly can these be sold?
• Quality Control- how many laptops were defective, returned and scrapped? What is the repair and replacement cost?
• Capacity utilization- what is the idle capacity? Is the capacity underutilized?

On the other hand, for a service provider, it would be more relevant to look at metrics such as Average Revenue per User, Employee Utilization rate etc.

Within an industry, across different sectors too, the KPIs would vary widely ,for example within service industry, in Consultancy the key metrics would be Utilization Rate and Billable hours; whereas in Banking, it would be worth assessing Non-Performing Assets , Loan to Deposit ratio etc.

In a consumer goods industry, it might be relevant to look at the number and nature of consumer complaints received, brand recall etc. While in a luxury goods sector, measuring Brand Exclusivity and Media Engagement merits more attention.

Thus, every business in a particular industry and/or sector has its specific metrics that may not be all that relevant or significant for other sectors.

For monitoring the progress of start-ups,all the entities cannot be painted with the same brush!

Author:
Mansi Handa