Speedometers, milestones, and maps enable driving, it helps decisions on speed, gear, and direction. Same way core KPI helps entrepreneurs and business owners make crucial decisions about operation, sales, finances, and people. However, many business-owners and entrepreneurs often ignore the core KPIs or wait for a perfect moment (certain level of maturity).
When driving you don’t wait for a long distance to cover before you start to see dashboard or maps, rather you wisely use them from the very start. Then why not follow a similar approach for your startup or business?
This blog covers the four core KPIs, a sequential approach to focus on specific KPIs based on enterprise lifecycle, and typical anti patterns.
Four core KPIs for any organization, across industry and size (be it small, medium, or a large organization) are
Top Line (total revenue)
Bottom Line (net profit)
Customer Satisfaction (CSAT)
Employee Satisfaction (ESAT)
While all four are important, at a different moment of the organization or product Lifecyle, keeping focus on one is a good strategy.
In the beginning (be it a startup or a new venture or product) focus on employee satisfaction (ESAT); an engaged and happy team can do wonders. And ESAT does not mean your employee only, rather your team (can be employee or a volunteer or even an advisor).
ESAT holds true even for a solopreneur, even if you are a solopreneur, nothing is built in isolation, you have few people advising, helping, validating, prompting your efforts. It’s your virtual team, and in initial days focus on engaged and happy feeling of everyone. Focus on ESAT; how can you measure ESAT varies based on nature of work or number of people.
Once you start to engage with customers, the core focus should shift to customer satisfaction (CSAT.) While you are focusing on CSAT, don’t lose attention to ESAT and continue with all good practices that helped achieve good ESAT. Again, how you measure CSAT depends on nature of work and customer engagement model; it can be NPS, rating, review, or direct feedback.
Journey forward, because you have engaged and happy employee (ESAT) and delighted customer (CSAT), you start to make money, now comes the third KPI the topline, how much money you are clocking. Your MRR (Monthly revenue rate, or some other KPI related to the topline). Don’t bother about bottom-line yet. Also, even if focus is now the Topline, attention to CSAT and ESAT is equally important, even more important.
In initial years (it can be a few months to few years depending on how deep pocket you are) focus on enhancing the topline. Reinvesting all the profit in further growth is not just a clever idea, it’s necessary.
Once you have more stable cash flow, start to emphasize the bottom line (net profit). At the end, any business is about value creation and profit making, however don’t jump too early on bottom-line KPI. Finding the right moment to shift from topline focus to a bottom-line focus is an art. Now, the focus will be bottom line yet continue to keep attention on other three KPIs (ESAT, CSAT and Topline).
All four KPIs are enabling decision making is a sign of business maturity. It indicates that your business has crossed the initial stages of trial & error for product market fitment, and processes for customer onboarding, delivery, sales, and financial governance are established now.
Last but not the least — Excess of anything is bad, especially the KPIs. Ironically, after a certain scale (growth) organizations start to invent new KPIs or corresponding OKRs. Remember, any KPIs that are not contributing to these four add little to no value. In most cases, such additional measurements (KPIs) are total waste; eliminate them.
Anti-patterns and recommendations:
Too late — not paying attention to core KPIs from the beginning. Waiting for a perfect moment is not good. Follow the KPI-lifecycle matrix.
Too early focus on Topline or bottom-line. Following the focus sequence of ESAT-CSAT-Topline-Bottomline is important.
Too many — creating unnecessary KPIs or OKRs beyond these four is waste.
Unable to create a balance — when organizations shift their focus from ESAT to CSAT or to topline, they start to ignore employee satisfaction and value only customer and topline (sales). All four KPIs are important and hold equal value.
Succumb to investor demand for financial numbers and start to make decisions that may adversely impact other KPIs. Treat your investor like your partner and convince & educate them on why balancing the 4 KPIs is important.
The order of importance is Bottomline, Topline, CSAT and then ESAT. Eventually, Bottomline is most important, then comes the topline, then CSAT and then ESAT. No point having good ESAT or CSAT, or even strong topline if the company is not making profit. However, in the business growth journey, the order of implementation (focus) is reversed… it’s ESAT, CSAT, topline and then bottom line.
If you have just started, keep the lifecycle-KPI matrix in mind, and pay attention to ESAT from day one.
If you have been running a business for quite a time now; reflect on where you are and what KPIs you are measuring, what’s missing, how you can incorporate the missing core KPIs quickly. Also reflect on unnecessary KPIs (the one that’s not impacting the four core KPIs) and think how can you eliminate them.
If you need any practical advice or sound boarding of your idea, please feel free to reach out to me.
