How to set operational metrics with 5 easy questions

SDS 003: Clarifying Operational Metrics

Hey! thank you for reading issue 003 of Startup Definition Sunday (SDS).

SDS is the newsletter for founders, bringing you clarity so you can read the startup newsletters in your inbox.

SDS arrives every two weeks (you guessed it) on Sundays.

In every issue you can expect:

• 1 Definition of startup jargon

• 1 actionable tip you can implement right away

• 1 article on Africa tech that you should read

• 1 gift for founders

Let's dive in:

It is the first day of the year. At least one person you know is making a resolution of sorts.

My one advice to founders: set operational metrics.

What are operational metrics?

Operational metrics: meaningful data about your startup and team to help you align with, measure and track progress on your company's goals.

Why set operational metrics?

As a company grows in size, it becomes more critical that there is a way of connecting the disparate parts of your startup for better decision-making, reporting and information sharing.

In the last few years of global VC investing, founders could get away with not setting operational metrics until much later. That world of blitzscale growth at all costs is dead (for now).

In this new world (for now) of risk-averse capital, investors' focus will move to prioritizing startups with a clear grasp of their operational metrics. Beyond the perspective of investors, operational metrics can be valuable in:

• measuring the success of the company and its products

• improving decision-making

• highlighting risk gaps in your startup's strategy

• motivating teams as they progress towards visible metrics

• gathering data for future fundraise rounds

How do you set operational metrics?

Most founders I have met dread setting operational metrics.

I encourage founders to work through this dread and set operational metrics by answering these 5 questions. At the end of these questions, founders discover the metrics they want to track:

What should I be tracking? Building a company involves several stakeholders and audiences. Think of all the main questions from these audiences concerning your business and type it out (or write, if you insist). In addition, include common metrics tracked in your industry, market and user base. You've already taken the first step to setting operational metrics.

What am I already tracking? As founders build startups, they inadvertently start tracking some form of data: KPIs, reporting data points etc. It is useful to review what you are already tracking to see if it answers any of the questions you noted. This leads you seamlessly to the third question...

What am I missing? When you compare what you are already tracking and the questions you raised you will discover 1 of 2 things: a) what you are tracking is relevant to a specific subset of your stakeholders, or b) there are clear gaps in your current metrics that don't address the concerns of your stakeholders.

Whichever option you take, will lead you to question four...

What changes can we make? Whether you found out that your current metrics are not relevant to all your stakeholders or that there are gaps in the metrics you are tracking, this is a great point to institute changes to resolve them. The goal of the changes you make is to give you a complete view into your metrics. A few areas to consider making changes: the structure of data you need, how to collect that data and where to store it.

Some people save the best for last. Unfortunately, I'm not some people.

I saved the toughest for last. The difference is, you've done all the pre-work needed to ace this part. Let's recap what you have discovered so far:

1. The full universe of relevant metrics you can collect

2. The changes in data structure, collection and storage you need to make to have a complete view of your metrics.

Which leads us to the last stop on our journey,

What is worth pursuing? This is the point to be critical. Evaluate the value of these metrics to your goals, and stakeholders' needs. Metrics that are difficult to measure and provide little value should be eliminated. My suggestion: pick one key metric per stakeholder category that is high priority to them but also valuable and easy for you to collect. Be ruthless.

So there you have it. In 5 questions, we have gone from "no idea where to start with setting operational metrics" to "here is one key metric for each stakeholder category I will be tracking in 2023"

If you only read one thing this week, read this...

As you steal a few minutes for yourself this first week of the year to read some interesting articles, check out Melanee Hutton's medium article on platform businesses. This deep dive is especially relevant for any future founders looking to build a platform business. Enjoy!

Founder's Corner

If today's issue on operational metrics has got you excited about setting operational metrics for your startup, the team at Accion Venture Lab created a toolkit - Operational Metrics & Reporting: A guide to getting started - you should absolutely read.

If you do end up reading it, send me an email of your thoughts!

Thank you for reading to the end of issue 003.

If you enjoyed reading this, you will enjoy following me on twitter. I share daily insights on the Africa tech, startups and gender-lens investing.

Let's chat again in two weeks,

Jasiel