Connecting your department's activities and programs to business growth by measuring and reporting on the key performance indicators is a crucial aspect of your role as a startup leader. The real mission here is to bring a story to the data. No one cares about every single data point on your team, especially not your board. We've talked about how to report at the board level, linking the most important metrics in your department to business results. In this chapter, we focus on the leading and lagging indicators in your program.
Leading indicators are the gates on the downhill ski run that show you're hitting your marks and will have a successful finish. If you miss one, you may miss the big indicator. Tracking the leading indicators will allow you to course‐correct early, before something impacts your revenue, churn, or another growth number.
The lagging indicators are those numbers that usually make it onto your objective and key results (OKRs) slides. Leading indicators usually have a strong, quantifiable relationship to lagging indicators, meaning if you generate X% growth of one leading indicator, you can predict Y% growth of the lagging indicator.
Examples of leading indicators and their associated lagging indicators:
If you're the VP of People, the board certainly doesn't care about every metric your Applicant Tracking System (ATS) generates. Your CEO probably doesn't either. They do care whether time‐to‐fill in roles has decreased and the quality and retention of candidates has improved because of the strategy you've implemented.
Key performance indicators can provide objective insights for your own team, your cross‐functional peers, your CEO, and the board into the performance of your areas and opportunities for improvement. Instead of focusing on the number of accomplishments (e.g., we hosted four events, 250 people came, etc.), talk about how much pipeline revenue you generated and what percentage of your goal Events and Field Marketing brought in.
When you care about the leading indicators that matter most, you can share this level of detail with other teams to help tell the story of your journey to success:
Depending on your background, quantitative measurement might be intimidating. Many first‐time Sales and Marketing leaders I spoke to had to take courses, get coaching, and do intensive study to feel confident working in spreadsheets and telling stories around the data and results. The good news is that, especially on go‐to‐market teams, revenue operations and other professionals can help you pull data from your various systems to track the KPIs you care about. You won't be alone in telling the story. You may want to hire a dedicated Ops person on your team to support your success.
Quant tools to get comfortable with:
Investor Jeff Bussgang says that churn and revenue are lagging indicators that he often looks out for upstream.
“When a customer is unhappy, certain things happen and then they reliably churn,” says Bussgang. “You want to look at the leading indicators, which are more like usage or net promoter score or number of logins and time on task and time in the app. Those are all leading indicators of happiness with a product and the customer, as opposed to the lagging indicators of the churn.”
As you regularly measure what counts for your department week‐over‐week, month‐over‐month, quarter‐over‐quarter, and so on, form an opinion on the why behind the data.
Your startup will need to measure and report on to your CEO (and the board, depending on the stage) factors including:
If the charts are all up‐and‐to‐the‐right, that's great, but do you know why? What channels are performing best in marketing, and what investments should you make next to scale results? What sales outbound techniques are working and which do you need to cut? The point of startups is to learn quickly. Those who can launch quickly, interpret results, and use data to inform future actions are successful. If you wait too long or aren't looking at the data closely, you'll miss opportunities.
On the go‐to‐market side, we talk about understanding our pipeline with “deal backwards” vs. “lead forwards” perspectives. We tell the story about revenue won vs. looking just at what we're doing without seeing its eventual result. It sounds obvious, but you'd be surprised at how many leaders get confused by the two. Vanity metrics are insights that look great on paper but don't necessarily translate to results.
For example, “Hey, we got website traffic from 100 candidates for our open role this week!” is fine, but does it translate into things that really count? How many of those 100 candidates turned out to be good‐fit applicants? How quickly did you fill the role? To make it even simpler, if you report that your BDR team sent 1,000 emails that week but none of them were opened or clicked by a prospect, that's an example of a vanity metric vs. one that has real leading indication (clicked BDR emails translating into a meaningful conversion to demo meetings booked, etc.).
Other financial metrics that investors at modern SaaS companies look for:
Founders and startup executives need to be fluent in those topics, but in the early days they need to maximize learning over financial metrics.
“I don't care if your revenue is zero and stays zero for two years, if you're learning a lot, and can show how what you're learning is contributing,” says Bussgang.
Entrepreneur and marketing expert Rand Fishkin advises looking at two or three metrics that matter.
“It may surprise some to find out that when it comes to the metrics that count, I like to keep it as simple as possible. I think that there's a ton of obsession, especially in marketing, with KPIs and multiple metrics and ways of measuring. Here's our brand impact from this PR campaign. Here's our search impact from this campaign. Here's our content impact from this campaign. Many folk who are obsessed with the measurement at those granular levels are going to spend a huge amount of their effort over‐investing in channels that produce measurable results, rather than useful and best results in the metrics that count most,” says Fishkin.
As you set OKRs, confirm with your CEO the most important metrics you'll report on. For example, my marketing organization might commit to $X million in opportunity pipeline from marketing sources and X opportunities. Many leading indicators roll up to these two numbers (and indicate whether or not we'll be successful), but that's not the level of detail I commit to. If my CEO wants to see in the weeds (which we do), it is documented, but that's not how I manage the business. The CEO doesn't care how many demo requests are filled out each week or how many website visitors we have so much as how much pipeline we generate that's closing into meaningful ARR for the business.
“As CEO, when it comes to the metrics you manage in your business, you decide. It's not up to me to tell you. Your job is to measure these things,” says Fishkin.
“I think in a healthy organization you are leaving that to the experts and the experts should be your VPs or C‐level executives who work for you. And if you don't trust them to make the decision about which thing to measure, that was probably the wrong hire or you're a terrible manager,” says Fishkin.
Everyone on your team should know which metrics they drive that contribute to the larger goal. For example, the sales team should know how their booking meetings with their SDR contributes to their successful quota attainment.
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