Goal setting & KPIs
Goal setting
Is it particularly important to set good goals in the startup world? But what are good goals? For example, is "I want to win new customers" a good goal?
You can objectively derive some criteria that a goal must have and that you should take into account when defining goals. One of these approaches is the definition of "S.M.A.R.T. goals".
S.M.A.R.T Goals
Let's analyze the above-mentioned goal "I want to win new customers" according to the S.M.A.R.T. goals approach:
S (specific/spezifisch): The goal should clearly specify what is to be achieved. In our goal, it is somewhat specific, but it could be improved by defining "being a customer" more precisely, for example: "I want to acquire new customers who purchase my Website Premium Package."
M (measurable/messbar): When defining a goal, you should know when you have achieved it or how far you are from reaching it. The example goal is vaguely defined, making it challenging to determine if it has been achieved. How many customers do you want to acquire? A better version would be something like: "I want to acquire 5 new customers."
A (achievable/erreichbar): Is the goal realistically attainable for you? In the case of the example goal to acquire new customers, this is likely to be achievable.
R (relevant): Is it actually desirable for you to achieve the goal? Does it make sense for your long-term strategy to reach this goal? The context is somewhat lacking in the example goal of customer acquisition, but it generally aligns with a reasonable approach.
T (time-bound/zeitgebunden): Similar to measurability, specifying the time frame is crucial and often overlooked. A better goal for us, in terms of time-bound, would be: "I want to acquire 5 new customers for my Website Premium Package within the next 2 weeks."
In summary, this means: Poor goal: "I want to acquire new customers." Better goal: "I want to acquire 5 new customers for my Website Premium Package within the next 2 weeks."
Backward Goal Setting
Especially as a founder with a long-term vision, it's important to set long-term goals to strive for. Unfortunately, long-term goals often don't help you figure out what you need to do next to eventually reach that big goal. And when setting short-term goals, you often lose sight of the big goal and can't work effectively towards it. People are also not very good at setting goals step by step into the future. A good technique is to set goals backward (of course, still oriented towards SMART goals). You set a goal in the future, say in 2 years. From that goal, you work backward to determine where you should be in 1 year to realistically achieve the ultimate goal. Then, you derive where you should be in 6 months, and so on, until you know what you need to do right now.
Here's an example: I want to build a larger community network for Starterkitchen. Ultimate Goal: In one year, I will create a statewide startup network platform in Schleswig-Holstein with at least 1,000 founders and 100 mentors. [Derived from that...] 1-Year Goal: In 6 months, I will have at least 100 founders and 10 mentors on the Starterkitchen network platform. [Derived from that...] 6-Month Goal: In 3 months, I will have developed and launched the Starterkitchen network platform, and at least 30 founders will have registered on the new platform from the existing community. [Derived from that...] 3-Month Goal: In 1 month, I will have created a directory with at least 20 mentors and 50 founders. [Derived from that...] 1-Month Goal: In one week, I will have conducted user interviews with at least 5 founders and 3 mentors, based on which the platform requirements can be determined. [Derived from that...] 1-Week Goal: Today, I will conduct a user interview with one founder to research the requirements for a startup network platform.
Using this method, it's much easier to break down long-term and big goals into manageable steps, so you know what the next steps are and which aspects to focus on.
Task 1: Use the backward goal-setting method to set goals for the next weeks/months/years. Remember to question whether each goal is S.M.A.R.T.
KPI's
One aspect that you will encounter in the startup world is KPIs (Key Performance Indicators). Performance indicators are measurable metrics that provide insights into your company's current economic health and simplify complex economic concepts into easily comparable figures. Some examples of performance indicators include:
Revenue in the last 30 days
Month-over-month revenue growth
Number of new platform registrations per day
Number of active users on the platform per day
Number of visitors to your website per day
Number of new newsletter subscribers per day
Number of lines of code written per day
...
This list can continue almost indefinitely. There are many metrics that can provide insights into a company's performance. KPIs focus on the most crucial performance indicators.
For a startup, especially in a later stage, it is essential to consider these metrics and set goals based on them. KPIs simplify complex relationships and allow for setting clear economic objectives that anyone can understand. In this chapter, we won't delve too deeply into the topic but aim to familiarize you with it. Typically, for startups, one of these two KPIs is vital:
Monthly Revenue: Probably the most critical metric because it most straightforwardly reflects economic success and is easy to measure. This is the metric that most of you should follow to approach a profitable business.
MAU (Monthly Active Users): If you're building a platform whose value increases as more users actively engage on it, and the usage is free (e.g., Facebook), you should track the monthly active users. You earn money by advertising to these active users in the end (and only then). If your platform doesn't follow this model, as mentioned above, focus on revenue as your primary KPI.
Task 2: Watch the video from Y-Combinator and select KPIs (primary and secondary) that you want to measure and that best represent your goals.
Tasks for this chapter 💪
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