5 Metrics That Don't Measure Startup Success
Whenever you ask a start-up CEO how it's going, the first statement out of their mouth is usually something about how they're "killing it." Always trying to present a upbeat facade, they will then go on to share a handful of metrics to support that statement.
How do I know? Because I did the same thing.
I never really knew how to answer this question, so I'd smile and rattle off the biggest metrics I could think of. The trouble was, the metrics I was using weren't connected to our success or sustainability. Here are five metrics I hear mentioned by start-up CEOs that have no correlation with your ultimate success.
How Much Capital You've Raised
Many CEOs believe that raising money validates their idea, especially when it draws media attention.
But while it's true that raising capital means a select few believe in your potential, by no means does it mean you have a successful business. It just means someone thinks they can make money off you.
How Many People You've Hired
The more people you hire, the more successful you are, right?
Actually, hiring lots of people probably means you're inefficient as a small team. Perhaps you're taking on too many projects or not being diligent about whom you hire.
Contour was a 50 person company that should have been a 25 person company. We solved our problems by adding more people instead of asking the hard question: Do we really need to hire these people?
How Many Users You Have
Some start-ups grow to an astronomical scale. And if you're Facebook, Instagram, Twitter, Pinterest, or Snapchat, you can raise enough capital to focus on a metric that has nothing to do with the quality of your business. Friendster, Myspace, Hulu, and Zynga are great examples of how this metric can quickly turn on you.
What does matter is how many customers you have, how happy they are, and how often they use your product. If you have a growing number of customers using your product or service frequently, you're on your way to creating a very successful business.
Remember: Customers pay you. Users don't.
Where You've Expanded
At Contour, we sold our product in 40 different countries, but that didn't reflect the quality of our business. We were leading in each new market? No. Were we adding value by being there? No. And did we have more than a single sales person activating each country? Definitely not.
Being a successful international start-up is incredibly hard. So before you rattle off the number of countries you are in, make sure each country is actually a success.
Where You're Selling
So you've opened a hundred stores and your product's on thousands of shelves. As great as that sounds, it doesn't mean you're adding more customers. The more stores you have, the higher the risk is your inventory won't sell. And slow turning product can be the death of a start-up.
If you're unprofitable in one store, adding more won't turn it into a healthier business.
Marc Barros is the co-founder and former CEO of Contour, a hands-free camera company. Shortly after graduating from the University of Washington, Marc co-founded Contour in 2004 and led the organization from a garage to a multi-million dollar company. Contour products were sold in over 40 countries through action sports retailers and national chains, including Best Buy and Apple.