Want To Be a Smarter Startup? Focus on Metrics for Decision-Making, Not Your Gut Instinct

February 10, 2012

1:00 pm

As we evolved as humans, we relied on our gut instinct to survive, going from “Um, there’s a lot of roaring coming from that corner of the jungle – maybe I’ll take a different route” to “Wow, this guy is a little aggressive – no date number 2 for you, crazy dude.”

Relying on instinct will always be super useful, of course, but as a startup, you need to make fewer decisions based on what you think or feel is right and more based on hard numbers and quantifiable data.  Ever hear of business intelligence (BI)?  Well, consider it your new best friend.

I’ll be honest – I had no idea what BI was til I met David Ferguson, CEO of DC-based 5000 Fish, who explained why his BI product, Yurbi (Your Business Intelligence), is a must-have for startups if they want to make smart decisions that will support their growth.

As he told me, there are a couple of key metrics startups need to look at:

1. Lifetime value of a customer

This is especially applicable if you have a recurring revenue model, but whether you do or don’t, you need to know this information because it’s a key factor in the customer acquisition cost – how much does each customer cost to get?

You need to understand where your customers are coming from – PPC ads, Twitter, Facebook, your blog, direct sales, search, engines etc.  Factor in churn rate, and you’ll understand what drives your sales process and the most profitable ways to invest your money.

3. Sales timing

You also need to understand the timing of sales.  Yurbi does this for themselves – they collect metrics on when users download the software, when they start using it and then when transacations begin.  As you tweak your sales funnel based on this data, you can add in a feedback system to see how tweaks are affecting sales.  If you don’t have the numbers to support your decision, that means you’re working on your gut instinct.

3. Operations and its effect on hiring

Anyone can tell you that hiring too fast is a HUGE mistake.  Labor overhead is a huge drain on your revenue, so if you want to make smart hiring decisions and only bring people on board when you truly need them, track the volume of customers.  If it’s increasing at a fast clip, then you know you can hire.

As Ferguson pointed out, all of the above data is spread out in the various programs you use for sales, accounting, etc. If you want to collect and analyze it, you need to know where the data is for starters.  The entire process is time consuming, to say the least – and time is already in short supply when launching and running a startup.

There are a lot of BI tools out there, but Yurbi is a pretty cool product.  First of all, it’s an enterprise level application – and their basic edition is free.  Score!

Second of all, it’s a SaaS product that connects to your databases and uses information you upload from Excel to show you trends, numbers, and history in real-time. You’ll be able to see very quickly how much growth have you had month over month, how many support tickets you are handling, and what processes might not be working right.

Third of all, it’s easy to install and configure.  Right now, you need to have your own server, but within 90 days a desktop edition will be released, followed by a cloud offering.

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Monika Jansen is a writer and editor who is happiest pounding out blog posts, newsletters, website content, and other materials. Follow her at: @monikacjansen

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