YC Partner Adora Cheung covers the importance of defining and tracking KPIs to understand how effectively your startup is reaching its goals.

Watch if:

• you aren’t tracking a key metric yet
• your KPIs aren’t growing weekly
• you are tracking too many KPIs
• you and your cofounders argue about which KPIs to track

Transcript

Adora: All right. So, I am going to be talking about setting your KPIs and goals for early-stage startups. So, I’m going to be pretty pedantic in this lecture. And the reason why is doing this correctly is a necessary condition for starting a successful or building a successful startup. So, the acronym KPI stands for key performance indicators. If you Google around for it, there are actually many definitions of what this actually means. But for the purpose of today, for this context, I’m going to define it as a set of quantitative metrics that indicate how healthy your business is doing.

So, this is important because, obviously, you should know what state your business is in at all times. So, setting the right KPIs and goals will objectively tell you if you’re doing well, just okay, or bad. So, nothing keeps you more grounded, humbled, and realistic about where you are then a bunch of numbers because if you interpret those numbers correctly, they don’t lie. It’ll also actually act as a feedback mechanism for whether your current strategy like user acquisition, launching new features, and so on and so forth, are actually working. So, if you do something and things go up, that’s probably good. If you do some things, some things go down, that’s probably bad.

And it will not only help you prioritize your time but also course correct. So it follows if you do this incorrectly. If you set your KPIs and goals incorrectly, you can direct your startup into a bunch of circles. Or if you do it for too long on to the wrong path, it’ll lead to its unnecessary demise. So, what are the right KPIs to set? I’m going to break this down into two pieces, primary metric, and secondary metrics. And most of today is going to be focused on the primary metric.

So, every week in Startup School, we’ve asked you in the software to fill out, to define your primary metric and then update its current value. By definition, you can only pick one primary metric. And it’s the metric, if you had to, you’d be willing to bet the whole company on. So, why just one metric? It’s a way to focus and keep things very simple. If there’s a way to get 90% of the job done with just one variable, that’s better than having a bunch of variables that gets, let’s say, 91% of the job done. In this case, the job to get done is quickly determining how well your startup is doing. So, what are the characteristics of a good primary metric? There are four of them.