I love metrics. I love understanding all kinds of different aspects of the business. What’s improving? What’s declining? Only, for the first 12-18 months, most metrics don’t really matter. Yet, entrepreneurs are constantly fretting over them. Besides revenue and customer count, popular metrics like cost of customer acquisition and churn rate aren’t meaningful due to a limited number of customers.
Here’s what matters in the first 12-18 months:
- Revenue – Getting that first $100,000, or better yet $250,000, in recurring revenue, shows there’s the kernel of something meaningful
- Unaffiliated Customers – While signing up friends and warm referrals is standard, the real test is signing the first 10 or 20 unaffiliated customers — the customers that buy the product because it solves a serious problem, and not just because someone wants to help you personally
- Product/Market Fit – A level of usefulness and functionality that meets customers needs and truly adds value (see Initial Product/Market Fit)
When an entrepreneur talks about metrics, and has a handful of customers, point out that the focus should be on increasing the customer count, and not analyzing things where there aren’t enough customers to be statistically significant. Most metrics don’t matter at the beginning — keep it simple.
What else? What are some other thoughts on the idea that most metrics don’t matter at the beginning?