KPI & Cash Control
|Jean de La Rochebrochard||Jan 2, 2017|
There are two main reasons why startups crash: clash (within the team) or cash (when you run out of it). The clash is a matter of cohesion as we discussed in #3. The cash is a matter of strategy, execution and monitoring. It’s always linked to numbers at some point and to your ability to master them. We often realize that founders poorly understand, under-master and under-estimate the importance of mastering their KPI… That is a real shame. So bring it on ! :)
You need to transpose your actions, execution and results into a clear, accurate and regular set of key performance indicators (KPIs). The reasons are super obvious:
KPIs are your control tower. When the sky is blue, things look obvious, when there are clouds on the horizon; all your certainties are gone. So get that control tower! Use it to measure your funnel, model equilibrium and everything that makes sense in regards with your business. This allows you to know where the business stands at any time and what problems may lay ahead.
KPIs are an easy standard to rely on and compare to previous results and other companies. We use them to compare people who operate in the same fields and companies which are in the same scope. All investors do that !
KPIs are your Delorean. Once you master them, you can build a proper P&L and cash plan. Otherwise you will for sure hit the wall before you can reach break-even or raise your next round on good conditions.
Track you data, master them, set-up a dashboard (visible.vc is releasing amazing features). Rely on your industry standards and don’t hesitate to ask other founders. I already published a post about the four pillars of KPIs: Funnel, Model, Growth, Retention. And A16Z has put together a nice list of KPIs too: Part 1 — Part 2
Don’t foolishly run out of cash. Make sure to get cash-flow positive or start thinking strategically how to get to the next round of funding with proper conditions. It’s always about the same things, over and over again: Team, Market-fit, Traction, Growing revenues, Burn control… Raise to have 18 months minimum of runway. Start raising 9 months before your theoretical death date. And when you need the support of your investors for intros, use this method & template.
Finally, run boards that are useful to you and your company. In order to do so, we invite you to use this model that works pretty well: https://medium.com/kima-ventures/how-to-run-your-board-meetings-30b613668b21#.j9fnepwst
Men lie, Women lie, Data don’t lie. Hopefully.