How to Use One Key Metric to Run Your Startup
Eric Barker stashed this in Tech
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.
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.
If you focus on everything, you focus on nothing.
You can do anything. But you cannot do everything.