Startup Metrics Help You Make Wiser Decisions
There are an infinite number of potential metrics when it comes to new companies or startups, and of course, founders are always touting their most favorable ones to investors, whether it is exclaiming about how often people come back to their platform, repeatedly use their service, or the percentage of users that are willing to pay for a premium service or feature. Metrics are invaluable because they give an insight into how a consumer truly feels about a product or a platform, and can even determine what aspects of the platform they prefer, or would pay more money for. In this day and age, we are past the outdated surveys and polls. If a service is free, a user even utilizing the service says something that could add to the metrics. If a service is free but offers a premium version, a user doesn’t need to take a vote first to let the company know whether they believe the premium version is worth it. They either are going to pay for the premium version, or not. This helps the startup determine a suitable price point because if they know that x amount of people are willing to pay $10 for their premium service, they can start to estimate how many people would pay $5, and whether that would be a better move for the company, or not. If the premium service offered features such as no advertisements and not much else, there is new information about how the consumer feels about advertisements – and it’s all thanks to the metrics.
Interestingly enough, we have seen the startup scene shift from using financial metrics to user metrics. The bottom line is that every person only has so much time during the day to use a certain number of applications and services. Even if your startup is not exactly making money hand over first, the amount of users that are interested clearly means that monetization opportunities will be plentiful later. It is well-known that Facebook could have charged its users, but its decision not to is what helped make it into what it is: one of the largest companies in the world, with over 1.4 billion daily users. When a substantial fraction of the entire world is using your service, and engaged, it is obvious that companies will be willing to spend money to be a part of what you are doing – and Facebook understood that.
It’s also important to know how often people are using it. Metrics can help determine how long your service captures users’ attention. If they are downloading your application and using it feverishly for two weeks, only to never use it again – that clearly would mean that your team needs to find a way to add the right features to help users stick around, whatever those may be. Of course, every startup wants longevity – no one wants to be part of a company that may not exist in ten years. That is why metrics such as user retention are extremely important, and give a window into whether you may have a company that serves a fickle purpose, and needs to develop a long-term plan on how to ensure that they penetrate their market permanently.
One metric that is gaining traction in terms of determining startup success is user growth. We all know that there is an initial period, whether it is simply novelty or word-of-mouth, where a particular service or application can gain traction extremely rapidly, but it says a lot if a company is able to consistently grow its base. This means that its existing users keep using the service, while new users keep flocking in consistently. Of course, this also can help determine how much competition there is for a certain market and whether the company should be ramping up advertising to aggressively target a certain demographic. So many important strategies could rise out of examining the specific metrics, and determining whether users are organically flocking to the platform because of its utility, or whether it is a flash-in-the-pan popularity effect, because you may notice your first users and customers are losing interest while the new users are joining. The bottom line is that metrics help determine whether you are going in the right direction, and that is clearly invaluable to a new company trying to establish a foothold. While it may be more difficult to determine exactly what the issues are with growth, at least metrics help you recognize whether there is a growth problem or not, and tailor this information to your product or service, the season, timing of product releases, consumer confidence, and a myriad of other variables. It’s also important to note that metrics are supposed to be used as a guide, and aren’t necessarily law. There are countless times when a company might go into full-gear utilizing a certain strategy that helps certain metrics, only to find that they have caused long-term damage to their reputation or credibility. It’s always important to keep in mind that longevity is more important than making sure that a certain number keeps investors happy, because investors ultimately aren’t interested in a company that has proven to the public that they are willing to make a fool of themselves or make the wrong decisions for the right numbers.
Ultimately, metrics help provide a balance. Every company has its obstacles, even the largest ones, whether it is a certain product not selling as much as the startup anticipated, or a feature being less well-received than expected. It is important to remain pivot and adapt, and not just for the numbers, but to keep the idea and vision of your startup intact. The goal of any startup is to make sure that the day-one customers stick around, and are constantly telling their friends and family about how amazing your product and service is, so that your company is constantly growing. In this way, it is important to remember that while metrics can tell you a lot about your company – they don’t tell you everything, and should be kept in mind, without making them the entire focus.
- Metrics help you determine what parts of your company work the best, and even give insight into the user’s mind.
- Metrics may help GET you funding, but it won’t always keep the investor around – your company has to put metrics to the side and ensure that they have the best service or product, first and foremost.
- Metrics are great, but they are not everything. However, when used properly, they can help temper expectations, and also see opportunities in areas of the company you were previously ignoring.