List articles abound on the topic of key business metrics. You can find 55 of "the best" metrics for this and 78 for that.
Some of them are actually quite good—but almost all of them assume you've mastered the behind-the-scenes work it takes to understand how those metrics fit into the inner workings of your business.
This is especially true in the modern business realm, where the SaaS (Software-as-a-Service) industry is, as our own founder put it, "awash in metrics." There are thousands of articles debating the merit of this metric or that and, yes, a plethora of list articles about which ones you need now... or else your entire company will come crashing down.
Much of this conversation is based on an assumption that if you have this moment...
...then all you need is a list of key business metrics to get to this moment...
Business, life... nothing I've ever experienced works quite that way.
Truth is, there's no shortage of information out there if you already know exactly which key business metrics you need and precisely how to implement them. But many businesses aren't quite sure about either aspect.
Small businesses, for example, may just be seeing the initial signs of product/market fit and are searching for which key metrics they most need to focus on so they can start to scale.
An enterprise business, for example, may be navigating a major pivot and they now need a new set of metrics to spur growth. Or maybe that enterprise business has developed an in-house innovation unit that is now tasked with taking a brand new product to market—the key metrics that members of this unit once lived by now may no longer apply.
So this piece is for those humble enough to admit they're unsure, and hungry enough to continue a pursuit of learning. It's for those who want to go beyond the shimmering facade and into the trenches where there is important (but often unheralded) work to be done.
While there are many processes out there, including a bunch of proprietary methods that you have to pay good money for, here is a kind of amalgamation of what I've seen many teams (including a few of my own) have success with. It consists of one 4-step phase followed by one 5-step phase.
Phase 1 of establishing key business metrics:
- Determine the stage (or even micro-stage) of your business
- Assess the strengths of your team
- Understand where your potential customers hang out (and where they go for answers)
- Categorize which key business metrics you could pursue, and make a decision
Phase 2 of establishing key business metrics:
- Delegation and ownership
- Benchmarking and goals
- Processes and systems
- Communication and transparency
- Accessibility and visualization.
The first phase is all about determining which business metrics are actually important to track for your product/service, and from there finding the intersection between your team's capacity and your overall business strategy.
The second phase is all about action and putting a plan in place for who controls the machine and who owns each part of the machine (we'll explore what that means). Phase 2 is where you'll wrap your chosen business metrics into the fabric of your company.
Let's explore each component of Phase 1:
1. Determine the stage (or even micro-stage) of your business
Some metrics, depending on the stage of your company, are simply more important than others. If you're in the startup stage, for example, it's critical for you to know if users are actually engaging with your product—and if that engagement is the type of engagement you want.
If you've bursted out of the startup stage and entered into the growth stage, it's important to start thinking about Monthly MRR and Customer Churn Rate, as these will be the foundation for your company's growth and retention efforts.
And if you've established that you can grow (and are growing), it's time to focus on efficiency, which means it's time to think about CAC Payback Period and Quick Ratio—key business metrics to focus on when you're ready to become maximally efficient in your growth.
For more on the important metrics in each of these stages, see this list article (I know, I know):
Which stage do you feel your business is in? Is it somewhere between those stages? Ask others in your company their thoughts, and when you've made a decision you'll have a torch that can light the way for some of the future steps we'll discuss.
2. Assess the strengths of your team
With the speed of business today, especially in the SaaS sector, I've grown into a big proponent of focusing on strengths rather than spending a ton of precious time trying to shore up weaknesses.
For a deeper glimpse into this mentality, check out the book StrengthsFinder 2.0.
Understanding the strengths of your team doesn't demand you master StrengthsFinder, but it does mean you take an honest look at what each member of your team brings to the table—not only in the context of your company but in the industry at-large.
For example, you may have someone on your team who is (or with a little help could be) a masterful project manager, but instead they are stuck and frustrated trying to single-handedly write all the technical documentation about how to use your product.
If you're a lean and scrappy team, this may simply be how it has to be for the time being. But if there's any capacity to nudge that teammate towards their natural mastery and away from what either a) frustrates them or b) they just aren't all that good at—strive to make it happen.
Additionally, the strengths of your existing team will help determine what kind of overall business strategy you can put in place. This is likely why you hired many of these talented people to begin with.
Here's an example of what I mean. Let's say you're short on cash to spend on advertising, but have built a team perfectly equipped to run a high-performance inbound marketing strategy. Not only should you lean into your strength, but you'll now need to lean into the metrics associated with that strength: unique readers, email subscribers, and organic-content-to-trial, to name a few.
3. Understand where your audience hangs out (and where they go for answers)
Even at major social media marketing conferences I've watched as seasoned marketers told the founders of marketing agencies not to spread themselves thin across too many platforms... while they themselves spread the content of their own marketing agency thin across too many platforms.
In the quest to grow your business, there's a constant itch to be everywhere any of your potential customers may be. But this is perhaps the quickest way to burnout, and perhaps the easiest way to get into that toxic rut of constantly starting and stopping metrics-based campaigns.
If you know where your audience is, you can create a strategy focused on empathically and creatively getting in front of them. If they are on LinkedIn, for example, there will be key metrics associated with this (such as impressions or click-through rate) that would be different than if you were scanning leads and collecting business cards at a trade-show booth.
Booyah, a small ice cream shop based in Toronto, knew exactly how to reach their targeted audience.
They knew, based on the visual appeal of their product, their own strength to capture this visual appeal, and people's habit of wanting to share their food photos, that Instagram would be a great platform for their growth.
In addition, because Instagram relies heavily on hashtags, especially location-based hashtags, they could target their efforts to potential customers in and around Toronto.
Here's a story about how they used the key metrics of Instagram, among others, to fuel their business.
Lastly, many of today's business efforts demand a two-fold approach; you at once must have a fantastic product or service while also being an educational resource for your potential customers.
This is why it's increasingly important to know where your customers go to answer their questions. Are they searching Quora or Google? And what questions are they asking that are in some way related to your product offering? Your job is to discover why they are asking these questions and, if possible, become their go-to source for answers.
Here are two free resources to help you learn more about your potential customer's questions:
The key metrics of content marketing will help you gauge whether or not you are increasingly becoming a trusted source. Here are some content marketing opportunities you may be missing out on (we were).
4. Categorize which key business metrics you could pursue, and make a decision
"Could" is the key word here. As with the example above, you may be barely hanging on with just rolling out updates to your product—let alone having the time or capacity to build out a content marketing strategy.
This is where capacity meets strategy. In (1) determing the stage of your company, (2) assessing your team's strengths, and (3) understanding where your customers hang out and what questions they're asking, you now have a far better ability to categorize which key business metrics you could pursue—and, as we'll explore shortly, what a strategy in pursuit of those metrics might look like.
Depending on the size of your team and the nature of the product or service you're offering, you may only have one road to go here. If so, now you know and can move to Phase 2. If, on the other hand, there are a few categories you could pursue, it's important to lay them all out and open up a conversation with your team about which of them you feel best equipped to pursue.
This can be done in a variety of ways—including anonymous surveys and 1-1 conversations to get a read on where each member of your business or department stands.
It may not be surprising, but I've found that finally making a decision on which business metrics to pursue typically comes together quite nicely.
If enough time and thought have been put into the previous three parts of this process, and if honest conversations have been had, there's usually a unanimous agreement on what is best to pursue. Especially because, as stated earlier, it's easier than ever before to learn about what business metrics you may potentially need.
Now, having made it this far in the process, you can essentially cherry pick those metrics that you and your team are ready to take seriously.
If you've made it through Phase 1, congratulations!
But you still have work to do.
As we did with Phase 1, let's break down each part of Phase 2:
1. Delegation and ownership
The image above comes from Ray Dalio's Principles (PDF here), a classic business book that has been downloaded over three million times.
In it, Dalio describes the need to think of your business as a machine—which means there are people tasked with delegating responsibilities and others with carrying out those responsibilities.
It's a simple concept, but it's easily destroyed because the scarcity mindset of needing to deliver results often propels business leaders to spend far more time working on parts of the machine than in making sure the overall machine is actually working.
Dalio says it like this:
"Your 'machine' will consist of the design and people you choose to achieve the goals. For example, if you want to take a hill from an enemy you will need to figure out how to do that—e.g., your design might need two scouts, two snipers, four infantrymen, one person to deliver the food, etc. While having the right design is essential, it is only half the battle. It is equally important to put the right people in each of these positions."
Dalio continues by stating that great managers delegate details and set the course, while lesser managers feel the need to get their hands dirty.
"Managers should view the need to get involved in the nitty-gritty themselves as a bad sign."
While there are of course times when managers must get in the nitty-gritty, leadership around key metrics demands that everyone in the department/team is aware of who is delegating and who is taking ownership of individual key metrics.
Yes, the entire team's work impacts the resulting metrics of everyone else, but responsibly delegating and pointing out ownership makes it easier for individuals and teams to prioritize their work, say no when additional outside projects pop up, and remain laser-focused on what matters most.
2. Benchmarking and goals
Once your key business metrics are agreed upon, and the team understands who is delegating and who owns which part of the machine, it's important to understand benchmarks while setting appropriate, achievable goals.
There's often a tug-of-war at this point, because when the email marketing lead sees a 25% open rate for a list of 50,000 as the "industry benchmark," she is torn between shooting for this or pursuing her goal.
Her goal, however, is more important. Once set, she can simply achieve what she achieves and then set her own benchmarks based on the goals she reached in the previous weeks or months.
In so many facets of business, "benchmarks" become diluted by the differences in variables. It doesn't make sense to compare the email open rate for a newsletter in the financial services sector (where people may be receiving emails with pressing investment information that they must act on within 24 hours), to the email open rate of a 5-day email course where subscribers can learn at their own pace.
All to say: research industry benchmarks, but set your own goals, bookmark those goals, and eventually use those bookmarks to establish your own benchmarks around the key business metrics you've set.
3. Processes and systems
A process is the organized set of activities that help you get things done. When you put multiple processes together, and use them all on a regular basis, you begin to create a system.
For example, if you're conducting an A/B test on a new product tweak, you'll likely have a process in place for how you do this. I've watched some teams use tools like Trello, where they drag a card from the Test Launched column to the Collecting Data column to the Complete column so the team is in alignment and there's transparency around progress.
Another way to think about processes is as the step-by-step and often template-possible tasks it takes to keep each part of your machine running smoothly.
But efficient individual parts do not necessarily mean the machine is working. This demands a system.
And this, again, is where the manager's bird's-eye view is critical in allowing them to access the insights others on the team likely do not have the perspective to see. A manager constantly tweaking parts may lose sight of the forest for the trees, the system for the processes, the machine for those parts.
Creating easy to explain and easy to follow processes are critical so that each teammate can work toward their key metrics as efficiently as possible. Likewise, stringing all of these processes into a system can help you more effectively launch campaigns, and have the team all driving toward their individual key metrics and feeling inspired by how their work is impacting the overarching business metrics.
4. Communication and transparency
The greatest processes and systems (and machines!) will always break down if there are not proper lines of communication and if transparency is an afterthought.
The owners of each part should have some knowledge of what the others are working on, and why. They should know who to contact and when and how to contact them.
The owners of larger parts that impact the smaller parts should, as able, take on managerial responsibilities.
Likewise, the leader stepping back to see the whole machine, although they aren't in the "nitty-gritty," must make sure communication lines in the nitty-gritty are clear, that there are safe channels to ask questions, pride in part ownership, and that the key business metrics everybody is working toward are shared.
As Dalio writes:
"Be radically transparent. Provide people with as much exposure as possible to what’s going on around them. Allowing people direct access lets them form their own views and greatly enhances accuracy and the pursuit of truth."
5. Accessibility and visualization
Which leads us to accessibility and visualization. Transparency can be and can certainly feel entirely meaningless without accessibility. It sends the message of, "Sure, the data is there but you don't have the key to it."
If you're in a position of leadership, it's critical that your team has constant and ideally real-time access to their key metrics and the key metrics of the business.
Perhaps the easiest way to do this while also creating a culture of data transparency is to display these metrics on a TV dashboard. Put one in your marketing department with that team's specific metrics, and one in your customer success area so everybody can see incoming tickets received and responded to.
Using such data visualizatons can foster within your data-driven culture a spirit of collaboration and a sense of shared ethics. These are the intangibles that can't be measured but that make the business a great place to work.
For additional reads on building world-class dashboards for your team, check out our Happy Dashboarding blog.
A few final thoughts on establishing key business metrics
First, if you haven't already, take some time and dig through Principles.
You may vehemently disagree with aspects of it, but Dalio's leadership at Bridgewater Associates, the world’s largest hedge fund, has been quite remarkable. Consider that he led the company's growth even when the 2008 global economic crisis was sinking all other competitors.
And some of the quotes, like this one, are sure to stick with you:
"Create an environment in which... no one has the right to hold a critical opinion without speaking up about it.”
Second, feel free to mix and match parts of the two phases presented here. You may be well beyond one, while another takes you a week or more to build out. There is no perfect formula.
Lastly, check out What are Business Metrics? and consider sending it to your colleagues before getting too deep into the phases. It will help make sure everyone is aligned at the start, and it may save you time from vetting those seemingly infinite list articles out there.
Originally published June 20, 2017, updated Mar, 31 2021