#METRICS for decision making vs vanity metrics

Continuation of my previous post about Mentorship & #Metrics. This post is an investigation on METRICS as a decision making tool

Good metrics are an excellent tool for decision making.
They serve the entrepreneur-startupper and the team as well, but are also instrumental to communicate with the stakeholders and generally to the rest of the world.

Metrics matter!

So if Metrics are important they should / must be:

• Understandable
• Comparative
• Apt to change behaviour
• In a right format (preferably a ratio)

Metrics are thus only tools not an objective per se, and as such need to serve the purpose for which they were conceived; which is to guide, to indicate progress (or lack of progress).

A slide from our last Innovits meeting: http://www.innovits.it/

AVOID the so called "Vanity Metrics" which do not give the entrepreneur (startupper) the right information to take decisions, but are there to show-off and look good.
If Metrics are tools, then their change over time becomes part of a process of permanent improvement.
But this works only if they fulfill their purpose, not if they are "window dressing" !

A nice definition of vanity metrics here: http://www.startupdefinition.com/vanity-metrics

Good Metrics can be distinguished by the type of information they are designed to highlight. The key elements and characteristics we may be looking for are indicated in the next slide, again borrowed from the Innovits association that I am member of:

If we consider it, this type of information is also related to what we might want to collect for statistical purposes. And that is exactly right. 

The stage of development of the startup vs the metrics used was indicated in my previous post in this same blog. Mentorship for Startups and Metrics AARRR - Acquisition Activation Retention Referral Revenue

Metrics also need ot be adapted to the type of revenue model that the startup is pursuing. Basically the type of business the startup operates in.

E-COMMERCE
TWO-SIDED MARKETPLACE
SAAS
MOBILE APP
CONTENT AND ADVERTISING


REVENUE MODELS

E-Commerce metrics
The two key elements the metrics should measure are:

• Conversion rate
• Annual purchase rate

But we also want to know:

• Size of the Shoppping cart
• Rate of abandonment
• CAC customer acquisition cost - is the cost associated in convincing a customer to buy a product/service. This cost is inclusive of the product cost as well as the cost involved in research, marketing, and accessibility costs.
• Revenue per customer or LCV lifetime customer value -
  is a prediction of the net profit attributed to the entire future relationship with a customer. Based on the present value of the projected future cash flows from the customer relationship

Two sided marketplace metrics
The three key elements the metrics should measure are:

• Total gross volume of the marketplace
• Direct acquisition of buyers and vendors
• NPS net promoter score - a management tool that can be used to gauge the loyalty of a firm's customer relationships, it measures the loyalty that exists between a provider and a consumer.

But we also want to know:

• Growth rate of consumers
• Growth rate of revenue
• Cash burn rate vs profit
• Trading liquidity: % of listings involved in transactions in a set time frame
• Efficiency in matching: time it takes for a user to find a listing
• Decrease in CAC vs Growth in LCV

SAAS metrics (software as a service)
The two key elements the metrics should measure are:

• Churn rate
• User engagement

But we also want to know:

• Daily use
• Activity inside the APP
• % conversions from users to paying users
• New ARR vs CAC (new annual recurring revenue versus customer acquisition cost)
• LTV vs CAC

Mobile APP metrics
The three key elements the metrics should measure are:

• Churn rate
• Ranking in APP store
• Number of times featured, quality of features

But we also want to know:

• Average revenue per user
• LTV
• User engagement

Content and advertising metrics
The two key elements the metrics should measure are:

• Display rates and click through rate
• Time spent on site

But we also want to know:

• Pages viewed on average per customer
• Number of unique visitors
• Cost of running ad campaign
• User engagement
• Bounce rate

As you can see, the key elements may vary much, in terms of importance of each measurement towards the goals of the startup. Which is obviously correct.
You need to measure what is relevant.

And you may adapt the metrics and the attention you give to them to the target. In the end the goal is to have a revenue model which is sustainable, and generates profit.

But if we analyse the content of the metrics versus the goal of each revenue model, we see that they all point towards what I said in my previous post!

Get your customers.
↓
Keep your customers.
↓
Get customers who are happy to pay for your product/service.
↓
Get repeat sales and referrals.

The metrics should therefore indicate the progress that we are making in this acquisition and fidelization process, and this is valid for any Startup.

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For those interested in information about Innovits, please read further.

Innovits is an organization of #managers and #entrepreneurs who work with #passion to promote #innovation and create opportunities for professional growth.

Since its foundation in Milan in 2010, #InnoVits builds a #cultural bridge between the #corporate world and #startups, leveraging the best of two cultures: the #experience of managers in directing a structured company and agility of entrepreneurs.

InnoVits now has over one hundred people, mainly distributed in Italy, working with enthusiasm on business projects with the aim to bring them to an appropriate level of #development to present them to the investment community, the already-established #ecosystem of industry and SMEs.

As a result of these activities, InnoVits has established a wealth of talent and expertise that it makes available to the ecosystem of innovation through #workshops, #seminars and dedicated #support.

Facebook album on Innovits
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#MarnixGroet is member of Innovits since 2016, passionate about startups and to learn about startup #mentorship

Detail of our activities below:

GroetConsulting - SME & Startup consultancy and advisory:
http://www.marnixgroet.com/

Creative Thinking Ventures - Pre-seed financing and startup support:

http://www.creativethinking.ventures/ 

Accelerator Lab Creative Thinking - Mentoring and follow-up in the growth of startups:

http://creativethinkingventures.com/