“If we’re building something that nobody wants who care if we do it on time and on budget?”
Always remember to think what kind of indicators you use to check if customers like your product
Established companies use turnover, budget, cost per-unit sold, profit margin etc. financial indicators to measure performance. But how do you measure a performance of a company that has not yet sold anything, does not know for sure what the customers want or even who the customers are?
Start-up Indicators i.e. innovation accounting
To tackle this challenge, you need to set indicators that reveal if you are making progress and inform you about the customer perception of the product. Indicators have to support your learning about the product and they need to measure the right things according to your goals. There is no template for it, but a few basic rules apply. See the example on indicators:
Example of the indicators in accounting/start-up indicators:
Goal: To know if customers are interested in the product
Sales – day 1
- Traditional accounting: 4 products sold
- Innovation accounting: 4/5 customers, or 80% of customers purchased the product.
Sales – day 2
- Traditional accounting: 5 products sold;
- Innovation accounting: 5/100 customers or 5% purchased the products;
- Which indicator will better express the potential and interest of the product?
- Which is more relevant to test the demand of the product?
As you are building your own company you can decide what indicators you wish to measure and set your own goals.
For profit making companies the sales, customer retention, value to customers and other financial related indicators are common.
If your company is a social venture you need a totally different set of success indicators to measure your success. Then take a look at the principles of social audit.
Other relevant indicators can be:
- Customers coming back to use the service (retention, you know they liked it);
- Money the customers spent on one purchase (average purchase size IF they have options);
- Frequency the customers use the service / product (log-ins to system, time spent using the service, amount of time same customer used etc.);
- User perception of the product/service.
Innovation accounting looks for reasons, behaviour and frequency of the customers and collects relevant numerical information to support the product development and innovation hypothesis.
- The relevant success indicators for the company;
- You know where to find more information on the topic
- You can answer to question “why investors will invest money in the idea”