KPI (Key Performance Indicator)

KPI stands for Key Performance Indicator, which is a metric used to measure the progress and success of a startup against its goals. A KPI or Key Performance Indicator is essentially any type of measure that you use to track the progress of your business towards meeting the goals and objectives that you have in place. KPIs are chosen carefully, as they indicate the health of your business and help you to identify areas that need improvement and where extra attention needs to be given.

KPIs can be financial or non-financial and can be used to measure the performance of departments, teams, processes, products and even people. Companies usually have specific business goals and KPIs can be used to understand the performance of how much of that goal has been achieved.

KPIs are intended to be measurable, meaning that they track what is happening that might be influencing success. They look at the data generated or collected from a business’s finds and activities and provide insight into current performance and trends. It is important to note that even though KPIs are calculated from a range of data, the metric itself is not the data, but rather indicates the value or trend associated with it.

KPIs come in a variety of flavours and can be tailored to track virtually any aspect of business operations. Some popular examples of KPIs for startups are customer acquisition cost (CAC), customer lifetime value (LTV), average order value (AOV), conversion rate (CR) and churn.

Let’s suppose that the goal of a startup is to acquire 100 new customers in the 3-month period. They can measure this objective against the KPI of Average Customer Acquisition Cost (CAC) that determines the cost to acquire a new customer.

At the end of the 3-month period, if the CAC was lower than the expected and expected from the budget and the goal of 100 customers was achieved, it could conclude that the project was a success. In this case, the KPI would have been very helpful in the assessment of the project, giving an indication of whether or not the company made the most efficient use of its resources.