Why Metrics Are a Startups Best Friend?

Too often, entrepreneurs ignore data about their business, in favour of “getting things done”. That is an oversight, argues Alan Gleeson.

Entrepreneurship in Britain continues to remain very much in vogue, ably assisted by heavy backing from most quarters (not least the media and government). Prime Minister David Cameron has put entrepreneurship to the forefront of his “strategy for growth”. “There’s only one strategy for growth we can have now and that is rolling up our sleeves and doing everything possible to make it easier for businesses to grow, to invest, to take people on, he told BBC News.

Similarly, British students are taking to entrepreneurship in ever increasing numbers. For example, Oxford Entrepreneurs now claims to be the largest student society at Oxford. These students are typically attracted to internet and technology start-ups, given that these share favourable industry characteristics such as significant addressable markets, low barriers to entry, modest initial capital requirements and relatively low costs of customer acquisition.

But if only the entrepreneurship journey was as straightforward as this. These entrepreneurs soon find out it is not. Sure, the barriers to entry are lower, and customers are one mere click away from their growing social networks. But the noise. How to be noticed when everyone is shouting? “If I can only get to Page 1 of Google everything will be fine”, they declare. But here in the UK, the Google rankings are dominated in many instances by US firms and progress up the organic listings takes months, if not years. Displacing US incumbents is practically impossible. But for these entrepreneurs this is a minor detail. They have lots of things to do and time is oh so precious. They can figure these things out later.

In reality this is a major problem. Awareness is everything, and today’s competition is no longer defined by industry sector, but rather defined by share of attention. We are all competing to capture people’s attention with whatever time is left, once they have logged out of their Facebook accounts for the day.

A more fundamental problem that entrepreneurs can control, however, is related to their understanding of the key revenue drivers of their businesses. Prioritising what to do is something many entrepreneurs are less qualified to do. They often focus on the things they like doing, or the things they are more comfortable with, to the detriment of their fledgling businesses.

These same entrepreneurs read blog posts by Mark Suster, Nic Brisbourne, Eric Ries, and perhaps even Steve Blank, while wholeheartedly embracing the Lean Start-up methodology. “Who needs a business plan when there is work to be done?” they claim. But are they listening carefully enough to these entrepreneurial sages?

Business planning entails goal setting and milestones, managing cash flow and prioritising work streams. This detail gets lost in the noise. “No business plan” does not mean no planning. So instead they plough on building and coding, without paying attention to the fact that demand may be weak; customer input has been negligible; and cash is dwindling. If they build it, they will come. But they don’t.

Internet entrepreneurs in the UK need to push managing metrics right to the front of their to-do lists. They need to re-embrace planning even if they have no desire for a business plan. They need to be relentless in their pursuit of identifying and tracking metrics across all aspects of their business.

Without metrics, it is all too easy to continue along a path where progress is measured in code releases and homepage redesigns, and the most fundamental metrics of all, conversion rates and revenue, are relegated further down the list. They are in build mode after all. The customers can come later once it is finished. But they don’t.


Depending on the type of Internet offering, different metrics vary in importance, but they all need to support the aim of monetising the traffic.

In the early days, visitor numbers was a key metric all business websites wanted to see increasing, exponentially. The reason is simple. The more visitors you bring to your website the greater your potential to derive revenue from them regardless of your business model, and without costs growing in proportion.

Others will argue that monetisation needs to happen from Day One and that entrepreneurs need to guard against focusing on vanity metrics metrics that appear impressive, but are essentially meaningless as they do not equate to revenue. The truth lies somewhere in between: business models can exist where monetisation happens after an audience has become significant — if the core proposition is both valuable and sticky.

By the same token, visitors can take many shapes and forms. And the more “qualified visitors” you can attract, the more likely they are to be valuable and more likely to convert. For example, if you are selling a service, where the core market is a local audience in the UK, traffic from Nigeria is not going to be of much use. I speak from experience here, where one of our business sites has a high portion of traffic from Nigeria for some reason, and not surprisingly this traffic simply does not convert.

So the choice of the exact metrics to set as goals for colleagues is vital, as is the need for some qualifiers. Traffic can be sourced through a variety of means, so setting a goal for page view growth alone, without requiring an additional qualifying characteristic such as “country equals UK” can drive the wrong behaviour> The goal is achieved, but the value is low.

If your website has a shopping cart a key metric to focus on is the E-commerce Conversion Rate (ECR), which measures the percentage of visitors converting to a sale. While you will want to push this percentage as high as you can, you will also want to drive the bounce rate (the number of people who just look at the one page) down. These goals are particularly important when acquiring visitors via Google AdWords or Pay-Per-Click, given that paying for non-converting high bounce traffic is worse than worthless.

Tools such as Google Analytics can enable entrepreneurs to undertake funnel analysis, which assesses the percentages of visitors proceeding through the shopping cart to the point of conversion. This funnel analysis needs to be at the heart of all shopping sites metrics. With continuous development it can lead to percentage improvements at each step, which ratchet up and can have a profound impact on the final revenue tally. If a Software-as-a-Service (SAAS) play, you will need to pay close attention to churn rates (the rate of customer attrition), customer acquisition costs (the average cost to acquire a customer) and the lifetime value (LTV) of your customers.

Finally, you’ll want to ensure that the percentage of visitors that get to your product pages in the first place is high. Again this is a metric which can be tested and improved through page design, linking strategy and site architecture.

For a predominantly content based site, metrics like bounce rates and time on page are important, as you want to demonstrate to prospective advertisers that you attract an engaged audience. As barriers to content creation are practically zero, (which is why much of it is essentially free on the web), quality content drives value and can be monetised successfully, as publishers like the Financial Times and The Economist illustrate.

Page views are also important; given that the business model for many content sites is typically advertising-led, where audience size is a key driver of value. Content attracting a particular demographic (another the qualifier) helps ensure advertisers find the site a commercially attractive proposition.

Finally, email marketing activity can be measured in terms of delivery rates (amount of mails delivered successfully), open rates (the percentage of mails opened), click throughs (the percentage clicking on the links in the mail) and ultimately sales. Page views, Twitter followers (and re-tweets), Facebook “likes”, and brand “mentions” on third-party sites can also be measured, with varying degrees of ease.

Busy entrepreneurs will always find something to do. But it is only through focusing on a number of key goals, and assigning metrics to these goals, that real progress will be achieved. Metrics bring transparency and transparency helps ensure a sharp focus.

Once data points are applied to key activities, the person responsible for the activity can be tasked with percentage improvements to help ensure that the overall revenue goal is being achieved. And the figures can help inform actions. A low delivery rate for emails can be improved by a database cleanse, a low open rate by A/B testing the email subject field, and low click throughs by A/B testing the on-page content and the call to action.

Without an obsessive focus on assigning metrics to key activities that drive real value, progress will continue to be measured by “doing stuff”, regardless of whether that doing is bringing the company any closer to profitability. Ignoring the fundamentals is one sure way of waking up one day to find the cash has finally run out.

Alan Gleeson is a B2B Marketing Consultant based in London with a passion for helping SaaS businesses to grow.

Follow Alan on Twitter or visit Work With Agility to learn more.

Originally published at www.alangleeson.com.

B2B and Tech Marketing Consultant. Based in London. Passion for #SaaS . Learn More at http://www.workwithagility.com

B2B and Tech Marketing Consultant. Based in London. Passion for #SaaS . Learn More at http://www.workwithagility.com