How to Use a Single Metric to Run Your Startup
The One Metric That Matters (or OMTM) is a single number that you care the most about at the current stage of your startup.
The data you collect may be helpful at some point; but if you can’t cut out the noise, you’ll get buried.
OMTM is like an easier to understand remix of the one number you need to grow:
http://pandawhale.com/convo/5154/the-one-number-you-need-to-grow-harvard-business-review
I love it!
For many kinds of online businesses -- collaborative, SaaS, media, game, mobile app -- the One Metric That Matters is similar: ENGAGEMENT
Engagement numbers are critical: daily active users, monthly active users.
In these businesses, revenues are generally a function of engagement.
The exception is transaction-based businesses.
In his growth article, http://paulgraham.com/growth.html Paul Graham throws this in there:
A good growth rate during YC is 5-7% a week. If you can hit 10% a week you're doing exceptionally well. If you can only manage 1%, it's a sign you haven't yet figured out what you're doing.
The best thing to measure the growth rate of is revenue. The next best, for startups that aren't charging initially, is active users. That's a reasonable proxy for revenue growth because whenever the startup does start trying to make money, their revenues will probably be a constant multiple of active users.
I've also heard that an even better metric is to measure: Invites/user: How many invites your users send out. It's a very pure number and directly measures both virality and growth.
Revenues are almost always a function of active users, it's true.
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