Your startup survives on very precarious ground. The resources it needs to survive and grow are in much shorter supply than your ambitions.
And if you’re a visionary entrepreneur, there’s a real danger that your passion for turning that vision into a reality may cloud your vision.
How can you get the necessary information to decide how best to spend those scarce resources or devote more of your time to attracting more of them?
The answer is to build a startup dashboard that tracks metrics that flash green, orange or red to inform you about the current and projected state of your startup’s progress on cash flow, investment prospecting, hiring, customer acquisition and product development.
Here are five key metrics for your startup dashboard:
1. Cash-burn rate light. The cash-burn rate tells you how long before your startup will run out of cash. It details how much cash you have available, the biggest bills you must pay and when the payments are due.
If you have more than a year's worth of cash in the till, you are in good shape. If you have between 11 months and three months before you run out, you should be getting nervous.
And if there's less three months, you have a cash crisis that will require a big financial infusion, a huge layoff or an orderly shutdown.
2. Capital-raising barometer. The capital-raising barometer maps out how well you’re doing in obtaining funding for your startup. It measures your goals and the cash received from sources including customers (the investment or quick-payment terms), suppliers (the investment or slow-payment terms), founders, friends and family, angel investors and venture capitalists.
If you ae talking with all these stakeholders about investing and have collected plenty of cash from them already, you are in good shape. You should start to worry if you are talking to all these groups but have received no interest from anyone in writing a check. And you should devote much more time to building relationships with these stakeholders if you are not already doing so.
3. Hiring-activity meter. Your hiring-activity meter lets you know whether you are building what investors would consider an A team. By job area (such as engineering, sales or manufacturing), it details the number of industry superstars you’ve already hired, the number to whom you have made offers and the number that you’re interviewing.
If you do not a large number of A players hired or in the recruiting pipeline, there’s a danger that your competitors do. Of course, you can’t expect to be hiring this talent unless you have a compelling mission and enough customer traction to attract it.
But if your hiring activity meter is not flashing a green light, you must take action to bring more A players into your recruiting pipeline.
4. Customer-growth monitor. The customer-growth monitor tracks the growth rate in number of customers and revenue. It details the number of users of your product and how frequently they use it, how many of them are recommending your product to people in their network, how many of them are paying for it and how much they shell out.
Your customer-growth monitor is flashing a green light if more people are using your product frequently, if many of them are recommending it to their network and if an increasing proportion is paying a higher price for it.
If you are achieving rapid growth but customers are not recommending the product and very few are willing to pay for it, find out why and change your product. And if you’re not getting more customers or they’re not paying for your product, then you need to take more radical measures.
5. Product-development tracker. The product-development tracker lets you know whether you are on schedule for building the right products. It details the timeline for your products, whether your team is meeting its milestones -- and if not, what’s holding things up and the feedback you’re getting from customers about the prototypes you're releasing to them.
Your product-development tracker will flash green if you are ahead of schedule and customers are giving useful feedback on the prototype. If you are falling behind on the schedule and not getting customer feedback on the prototype, you're in trouble -- and should investigate why and make changes.
It’s vital for your startup’s survival to build and use this startup dashboard. Start today!