Key performance indicators (KPIs) are essential for measuring and improving your start-up's progress towards your goals. But how often should you review and update them to ensure they are relevant, accurate and actionable? Here are some tips to help you find the right balance between too much and too little data analysis.
Before you start tracking and reviewing your KPIs, you need to define them clearly and align them with your start-up's vision, mission and objectives. Your KPIs should be specific, measurable, achievable, relevant and time-bound (SMART). They should also be linked to your key business processes, customer segments, value propositions and growth strategies. Having clear and consistent KPIs will help you focus on what matters most and avoid getting distracted by irrelevant or misleading metrics.
There are different kinds of KPIs just like there are different kinds business plans. You have business plans that are designed to bring in investors, or those designed to get a loan, or the ones you sketch out for yourself so you know where to go and how to get there. Similarly, KPIs serve different purposes. Some are used to justify a spend in a particular area of your business, some satisfy a client's need to see their project advance, and some are for you to know you are on track with that aforementioned business plan. Know why you are developing the KPIs before you start creating them.
Once you have defined your KPIs, you need to review them regularly to monitor your performance, identify trends, spot issues and opportunities, and make informed decisions. How often you review your KPIs depends on several factors, such as the nature and stage of your start-up, the volatility and complexity of your market, the availability and quality of your data, and the feedback and expectations of your stakeholders. However, a general rule of thumb is to review your KPIs at least monthly, quarterly and annually, and adjust the frequency according to your needs and goals.
Reviewing your KPIs regularly is not enough if you don't update them as needed. Updating your KPIs means revising, adding or removing them based on the changes in your internal and external environment, such as your product development, customer feedback, market trends, competitor actions, regulatory requirements, investor demands, etc. Updating your KPIs as needed will help you keep them relevant, accurate and actionable, and avoid wasting time and resources on outdated or irrelevant metrics.
It all depends on the KPI. If you break down goals into daily or weekly KPIs, then monthly adjustments may make sense. For longer term KPIs, you may want to look at how you are doing that frequently, but you probably shouldn’t make adjustments more than quarterly or annually at most.
Another important aspect of reviewing and updating your KPIs is communicating them effectively to your team, customers, investors, partners and other stakeholders. Communicating your KPIs effectively means sharing them in a clear, concise and compelling way, using visual aids, dashboards, reports, presentations, etc. It also means explaining the rationale, context and implications of your KPIs, and soliciting feedback and input from your stakeholders. Communicating your KPIs effectively will help you create alignment, transparency and accountability, and foster a data-driven culture in your start-up.
This is critical. Once you have staff, they should be as obsessive about hitting KPIs as you are. Staff need to know how they will be measured and rewarded. They also need to know when to make adjustments in their personal goals, and when adjustments are being made at the corporate level. Bottom line - it does no one any good for you to be silently measuring progress (or lack thereof). It’s like trying to power a ship with only one oar in the water.
Finally, reviewing and updating your KPIs is not a one-off or static exercise, but a continuous learning process. Learning from your KPIs continuously means using them to test your assumptions, validate your hypotheses, evaluate your results, and improve your actions. It also means using them to inspire new ideas, innovations, experiments and opportunities for your start-up. Learning from your KPIs continuously will help you adapt, iterate and grow faster and smarter.
KPIs are powerful tools for start-ups, but they can also come with potential pitfalls. For instance, having too few or too many KPIs can lead to confusion or complacency, while having vague or unrealistic KPIs can lack clarity or credibility. Additionally, isolated or siloed KPIs ignore the interdependencies and trade-offs between different aspects of your start-up. Vanity or lagging KPIs can inflate your ego or reflect the past rather than the present or future. Furthermore, static or rigid KPIs resist change and innovation. To avoid these issues, you should review and update your KPIs regularly and use them as guides instead of rules for your start-up's growth.
Think of your KPIs as a GPS for your business plan. You have to remember that the map (the business plan) is not the territory (the real world). The map just gives you purpose and direction. The GPS tell you where you are in the real world relative to the map. But if the GPS is off, you need to reboot, and rethink your KPIs.
As we say in scuba diving, the adage "plan your dive, dive your plan" in reality looks more like, 'plan your dive, dive your dive, log your plan.” In other words, KPIs need to be flexible enough to accommodate what actually happens once you start running your business.
Most KPIs are too complex for most start-ups. Added bureaucracy that does not improve processes or performance. Get a coach/consultant that will help chose the right KPIs for your start-up and will help you use them to your benefit.