• How-to

Performance tracking lets you step back and evaluate your competitiveness in the market by taking a critical look at your products/services and the important metrics associated with them. You could set targets and benchmarks for yourself in the process. Here are the critical factors to evaluate.

1. Positive cash flows and cash in hand: For a startup, cash is the most critical element to keep operations running. Your cash flow for the first few years could be negative, considering the heavy capital investment you may have made and the slow topline growth that occurs till you establish yourself. So, keep an eye on your cash balances and make sure you have enough liquidity to fuel your operations and investments for the next three/six months.

2. Customer acquisition and customer stickiness: What is the unique value proposition you are offering to attract your customers? And what’s stopping them from leaving you and going to the next available service provider in the market? There could be two reasons for a customer to stick to you. One, you are giving him something that is unique. Two, he remains happy with your product and so doesn’t bother to go hunt for something else. Remember, a customer in hand is worth two in the pipeline! So, pull up your socks and check how satisfied your customer base is.

3. Flexibility of market offerings: To begin with, a good pilot throws light on the challenges that the market offers and how well your product will fare with your customer base. However, it is also very important to be open to customer feedback and be flexible enough to accommodate that feedback to improve products and processes further. Adoption and implementation of customer feedback will in turn lead to improved customer stickiness.

4. Time to market: While you plan and execute successful pilots and do enough R&D to make the end product viable, you should always be careful that your time to market doesn’t get so stretched that the initial business idea loses its value in the market. It’s a very dynamic business environment out there—‘slow & steady’ might no longer win the race for you.

5. Operational costs: In the mad rush to build your topline and get your business running, often your bottomline gets ignored. However, cost efficiency is the one factor that could help you control your business interests. You can look at the main material cost elements on your P&L statement—your manufacturing costs and your customer acquisition costs (applicable to service providers). These main cost elements can be evaluated vis-à-vis available industry benchmarks to measure the proficiency of your business processes. The more controlled your costs are, the better your bottomline looks, and the faster your business breaks even!

Evaluating the above critical metrics will give you a fair idea of where your startup’s performance stands.

©Entrepreneur October 2010

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