At nearly every kind of organization, the ability to communicate effective business metrics -- both internally and externally -- is among the most important capabilities that can be established. Good metrics can help you motivate your team, stay focused on key objectives, create realistic forecasts, impress investors and become acquirable by larger companies.
The ability to create a strong metrics-driven culture is arguably one of the most critical skills for any new manager or CEO to possess.
The problem is that learning to think like a business-metrics analyst is really hard! It took me a few years to truly understand how to manage startup metrics as CEO of FirstGroup Ghana, despite having nearly 10 previous years of experience in economics, finance and statistics.
The existing litany of books and blog posts did not sufficiently prepare me for the “best practices” used in the world of business management analytics.
Much of the literature about growth metrics assumes that you are beginning with a series of key performance indicators that you already know you want to optimize. Want to improve retention? Just do a cohort analysis. Want to measure engagement? Simply calculate your daily active to monthly active user ratio. Want to boost monetization? Just fix your churn and your cart-abandonment rate.
These metrics may indeed be important for some companies, yet every company is different.
Use the metrics that really matter in your business rather than just starting with arbitrary metrics and tools such as Google Analytics or MixPanel, I recommend that every company begin its metrics-driven transformation by developing a complete business model dashboard.
By this, I generally mean a shared Google spreadsheet(s) with a high-level multi-month performance summary, which allows all stakeholders to “dig down” and explore all the drivers that affect business growth. Starting with the structure of the model that you need helps keep you focused and will help you better target the data you need to actually collect.
Business models can generally be divided into two types: Revenue models, which help you understand all the components of your growth, and marketability models, which help you understand how profitably you can scale your business with paid-marketing activities.