Checks at the Start of Vehicle Drive: Whenever we start driving a vehicle, just before beginning our journey, we check for the functionality of brake system, gear system, horn, fuel and speed indicators and obviously its look or dirt/dust freeness. These checks are simple and intuitive. Almost every person knowingly and unknowingly performs these checks to ensure glitch free ride.
If all the systems are functioning perfectly, you will reach destination without any concern. And in case you forget to check the fuel level – I guess you are well aware of what happens next.
Once you have decided to convert your Idea into a business, you are already ahead of 99% of the crowd who can’t dare to follow their dreams. Your startup is speeding up on runway to take a big leap. Now what is the check point – like the one in case of driving a vehicle – to ensure smooth glide of your startup from Idea stage to a big market player?
Resources which are required for survival and growth of startups are scarce. Entrepreneurs are generally blinded by their passion of converting vision into reality and they forget to keep a check on necessary information flow about the availability and usage of these resources.
Few metrics for keeping a check on information related to all resources and its flow – in & out – will not only be helpful but will keep founders updated about the current status & will help in planning further resource requirement. A dashboard that tracks metrics that flash green, orange or red to inform founders about the current and projected state of your startup progress on various types of flows will be a big help.
Various types of resources and information flow that are very important are as follow:
- Cash In and Out Flow
- Investor Confidence & Capital Inflow
- Talent Acquisition and Team Composition
- Customer Acquisition
- Product/Service Development Tracker
- Supply Chain Partners’ Health
- Customer Relationship Management
- Feedback, Review and Rating in General Public
Here is the detail of these metric and how they are going to help in assessment of success of your startup –
1. Cash In & out Flow Rate Metric: This will be responsible for assessment of cash availability. Net cash inflow is sum of your business operating margin plus funding from various sources. Cash outflow is the money you are spending on running the show.
The cash-burn rate tells you how long before your startup will run out of cash. It details how much cash you have available, the biggest bills you must pay and when the payments are due. Keeping a check on big bills due, available cash amount and dues will keep founder aware of the ground realities.
Through cash burn details if you are able to plan for ten to 12 months of sustenance, then your company is in good shape. If cash burn is around 4 to 9 months, you need to act real fast to secure support through funding. And if there’s less three months, you have a cash crisis that will require a big financial infusion, a huge layoff or an orderly shutdown.
2. Investor Confidence – Capital Inflow Metric: Though investment is never an initial requirement for initiating any startups but down the line after planning for business expansion, funding gains importance.
The capital-inflow metric maps out how well you are faring in securing funding for your startup. It measures your goals and the cash received from sources like customers (quick-payment terms), suppliers (slow-payment terms), founders, friends and family, angel investors and venture capitalists.
Funds from family/friends etc are always available at your service (hope you have good value proposition among your well wishers) but are limited. Getting Funds from venture capitalists/ Investors is always a tough nut to crack. While they evaluate the founders on parameters like flexibility, determination and imagination, they also check the feasibility of your business as a constant source of income in near future.
Good capital inflow is always a blessing if you are able to direct it to the proper channels. Too big capital inflow always prompts founders into taking over ambitious decisions and too little capital inflow is always a worry.
3. Talent Acquisition and Team Composition Metric: Your employee meter lets you know whether you are building what investors would consider as a good team. By job area (such as engineering, sales & marketing , CRM manager, HR etc), it details the number of industry big shots you’ve already hired, the number to whom you have made offers and the number that you’re interviewing. But before that you need to understand the actual number of heads that you require to run and expand your business model.
Another issue to look for is that you need to build a vertical team with flow of information from top to bottom & vice versa. Initially a flexible team which can work in multi-job kind of role will well fit into your plans. Too many experts and too many people for a single type of job generally create friction among team members.
Your employee metric should correctly graph the complete organisation structure, should always tell you about the next talent requirement or emptied post. You should always try to build a strong team.
4. Customer Growth Metric. Product’s penetration in the customer base is most vital factor for business growth. The customer-growth metric should begin with clear mention of your target customer and how much your product has been able to penetrate into that customer base. Few elements of this metric could be – Product growth rate, revenue generation, number of customer using the product and frequency with which they use it, recommendation trend in customer circle and how much they are ready to shell out for your product.
Good penetration in target customer base and positive recommendation trend in their network, increasing proportion of customers paying higher price for your product is a good sign. If it’s otherwise then try finding some real reason behind the same and try some radical measures to change your product’s image.
5. Product/Service Development Tracker Metric. Automotive industry employs a very good tool – APQP (advanced product quality planning) for tracking down the product development. It’s a comprehensive tool which tracks real time progress and allows advanced planning for customer satisfaction. This tool is the major reason behind the timeliness of the launch of number of automobiles into market.
This metric lets you know about being on schedule for building the right products. It details the development timeline for products, about your team is meeting its milestones and if not, what are the reasons behind same and finally customer’s feedback on product’s prototype given to them for trial.
Staying ahead of schedule or meeting timelines, positive feedback from customers (on prototype parts) will keep this metric green. Otherwise it will help in identifying the problem and finding solution for making perfect product.
6. Supply chain partner’s health metric. Unless you are a self dependent startup, there is high possibility that your finances & operation will be affected by your supply chain partners. Whether it is part/product suppliers or delivery service providers, your product’s review is based on complete supply chain’s ability to deliver it to target customer.
This metric lets you know the financial and operational health of your direct and indirect stakeholders. Percentage and priorities of your dependency on that partner – is also a factor of this metric.
If the partner is in good health and is supporting your day to day product delivery to customer in a great way then this metric signals green. In case of any problem in the supply chain you will be identify party responsible it and in devising strategy to tackle the same.
7. Customer Relationship Management Metric. Pre and post sale customer relation management is important factor for any startup. This metric will be responsible for getting an insight into how your sale and service team is able to generate traction of new customer and how your team is able to sort out post ale problems. Time taken to close a call can also be the check point for this. What is the number of customers which you are able to retain is equally important.
Startups backed by better CRM performance are hit from day 1. Customer retention and excellent post sale services are the steps for successful business venture.
8. Feedback, Review & Rating in General Public: This metric is a check about how public is taking your product. If there is any critical assessment of your product, be open to accept it and look for the best possible solution you can provide. Reviews & rating on various social media platforms also can be helpful for this purpose. Customer feedback is always a reality check for every product.
If customer’s rating and reviews declare your product a success, this metric could signal green. Otherwise this metric could act as refining agent for your product.
Wish you luck for your startup. Stay tuned with FS for more updates.