YC
Adora Cheung - How to Set KPIs and Goals
@ Y Combinator
08/01/19
Takeaways
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Adora Cheung
08/01/19
@ Y Combinator
Key Performance Indicators (KPIs) are quantitative metrics that indicate how healthy your business is, helping you understand its current state at all times.
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Adora Cheung
08/01/19
@ Y Combinator
Setting the right KPIs and goals will objectively tell you if your startup is doing well, just okay, or bad, keeping you grounded and realistic about your progress.
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Adora Cheung
08/01/19
@ Y Combinator
KPIs act as a feedback mechanism for your current strategies, such as user acquisition and feature launches, allowing you to prioritize your time and course correct as needed.
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Adora Cheung
08/01/19
@ Y Combinator
If you set your KPIs and goals incorrectly, you risk directing your startup down the wrong path, which could lead to its unnecessary demise.
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Adora Cheung
08/01/19
@ Y Combinator
When choosing KPIs, focus on one primary metric that you would bet the whole company on, as it simplifies your focus and helps you determine how well your startup is doing.
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Adora Cheung
08/01/19
@ Y Combinator
A good primary metric should quantify the value you're delivering to your customers, indicating how much they want your product, with revenue being the best metric.
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Adora Cheung
08/01/19
@ Y Combinator
Your primary metric must capture whether your product provides recurring or enduring value to users, such as monthly recurring revenue for SaaS tools.
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Adora Cheung
08/01/19
@ Y Combinator
The primary metric should be a lagging indicator of success, reflecting real value delivered, like revenue from customers who have already paid for your product.
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Adora Cheung
08/01/19
@ Y Combinator
Your primary metric should also be usable as a feedback mechanism, helping you prioritize strategies and make quick decisions in your startup.
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Adora Cheung
08/01/19
@ Y Combinator
While revenue is often the best primary metric, some startups may focus on active users, especially if building a large audience is a prerequisite for monetization.
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Adora Cheung
08/01/19
@ Y Combinator
In advertising-based business models, having millions of active users is essential before brands will buy ads, making active users a reasonable proxy for revenue.
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Adora Cheung
08/01/19
@ Y Combinator
If your startup has strong network effects, focusing on active users may be more important initially, with revenue becoming a focus later on. It's crucial to define what 'users' means for your startup, as it can vary significantly. For example, having 100 users could mean they just signed up or that they actively engage with your product daily for about 10 minutes. The latter is a much more valuable metric.
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Adora Cheung
08/01/19
@ Y Combinator
In a marketplace like Airbnb, you have two types of users: guests and hosts. To measure success, you need a metric that reflects value for both groups, such as the number of nights booked.
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Adora Cheung
08/01/19
@ Y Combinator
For platforms like Uber, a suitable primary metric could be the number of weekly trips, as it accounts for both riders and drivers.
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Adora Cheung
08/01/19
@ Y Combinator
In biotech or hard tech businesses, your primary metric might not be revenue or active users, especially if you're still validating whether your technology works. Instead, focus on technical milestones that demonstrate progress.
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Adora Cheung
08/01/19
@ Y Combinator
If you're in a regulated industry and can't sell your product yet, your primary metric should focus on demonstrating technical feasibility rather than quantitative sales figures.
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Adora Cheung
08/01/19
@ Y Combinator
It's important to track a few secondary metrics alongside your primary metric to gain a comprehensive view of your startup's health, rather than focusing solely on one metric.
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Adora Cheung
08/01/19
@ Y Combinator
Don't get caught up in tracking too many metrics at once, as this can lead to analysis paralysis. Instead, focus on three to five key metrics that matter most to your business.
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Adora Cheung
08/01/19
@ Y Combinator
When you haven't launched yet, focus on understanding your target customer and the problem you're solving before worrying about metrics.
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Adora Cheung
08/01/19
@ Y Combinator
Once you're building your product, defining your primary metric helps align your team on who your target users are and how to attract them.
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Adora Cheung
08/01/19
@ Y Combinator
Your goal should be to grow your primary metric consistently, as this indicates you're creating something that people want and that can scale effectively.
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Adora Cheung
08/01/19
@ Y Combinator
When setting goals for your primary metric, aim for a weekly growth rate. This approach allows for frequent feedback and helps break down progress into manageable chunks.
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Adora Cheung
08/01/19
@ Y Combinator
The growth rates of successful startups can range from twenty to two hundred percent month over month, but they typically cluster around twenty to fifty percent month over month.
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Adora Cheung
08/01/19
@ Y Combinator
A good growth rate during Y Combinator is five to ten percent week over week; hitting ten percent weekly is considered exceptional.
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Adora Cheung
08/01/19
@ Y Combinator
If you're only achieving one percent weekly growth, it indicates that you haven't figured out your business model yet, which may not be a good sign for a startup with billion-dollar potential.
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Adora Cheung
08/01/19
@ Y Combinator
When setting your goals, define them based on what you believe is ambitious and achievable for your product, rather than what others are doing.
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Adora Cheung
08/01/19
@ Y Combinator
If you're solving a real problem in a large market, there's likely a lot of latent demand, which can lead to fast initial growth for your startup.
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Adora Cheung
08/01/19
@ Y Combinator
The time it takes to acquire a user and make a sale varies between consumer and enterprise startups; consumer startups often have instantaneous sales, while enterprise startups may take months due to red tape.
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Adora Cheung
08/01/19
@ Y Combinator
In the early stages, focus on organic growth rather than paid users, as relying on paid growth can be misleading and should be avoided as much as possible.
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Adora Cheung
08/01/19
@ Y Combinator
Startups should aim for exponential growth goals instead of linear goals to maximize their potential.
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Adora Cheung
08/01/19
@ Y Combinator
To set effective goals, you can either pick a growth rate you believe you can achieve or time-box an absolute goal, such as the number of active users or revenue you want by the end of a specific period.
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Adora Cheung
08/01/19
@ Y Combinator
Metrics and goals are only useful if leveraged as motivational tools; create a visual representation of your growth targets and update it regularly to keep your focus.
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Adora Cheung
08/01/19
@ Y Combinator
If you miss your weekly growth targets, analyze the obstacles preventing you from achieving them and be proactive in addressing these challenges.
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Adora Cheung
08/01/19
@ Y Combinator
It's crucial to be honest about your startup's current status and to regularly fill out your primary metric and goals to maintain accountability and track progress effectively.