THE USE OF KPIS IN THE MANAGEMENT OF A STARTUP

The KPIs (Key Performance Indicators) are indicators used to measure how efficient a Company is when trying to achieve its objectives. Defining which KPIs to use is an important step in a Company's Strategic Planning process, as noted in the article Corporate Governance: Performance Indicators (KPI's).In the digital age, with the emergence of analysis tools of Big Data and with Artificial Intelligence, KPIs have become important in validating and monitoring Strategic Planning, especially within startups.Despite the startups if they differentiate in the most diverse ways, there is a factor common to all and fundamental for them to be successful: to have a technological differential that allows them to be scalable and, consequently, to reach the widest possible audience. This differential allows them to deliver a better product than those previously available at a price lower than those charged in the market. As an example, companies such as Netflix, which use Artificial Intelligence tools to recommend Movies and Series according to the preferences of their subscribers. The Company currently has a base of approximately 60 million customers, and through its business model, it has declared the end of DVD rental companies and has taken space from major producers of film and television content. The writer and entrepreneur Eric Ries, in his book Lean Startup, Quote that startups they exist not only to create products, generate money or serve customers, but also to learn how to build a sustainable business. None startup It's a startup forever and, during this phase, it is very important that entrepreneurs create management tools that allow the sustainable growth of the Company. This learning process, according to the author, needs to be validated through frequent experiments, which allow entrepreneurs to test each element of their products, transforming them into concise data., These data will then be transformed into KPIs, so that they correctly reflect the reality of each business. Companies like Netflix use and disclose to their Investors a series of metrics and KPIs that are monitored periodically and serve as a basis for evaluating the health of the business, such as the number of new subscribers, the number of canceled subscriptions and the amount of their own content produced. However, to be assertive in validating a product and managing a business, it is important that all data be collected and analyzed correctly, and transformed into standardized information. Below are five of the key metrics, used by startups that are fundamental to the validation and conduct of your business:

1. COCA: CAC, from English, Customer Acquisition Cost, means Customer Acquisition Cost and serves to measure how much a company needs to invest in sales, marketing, and other related expenses to acquire a new customer. Example: A company that invested R$ 10,000.00 in Google Adwords, without any other commercial expense, resulting in the acquisition of 100 new clients, has a CAC of R$ 100.00.

2. LTV: The Lifetime Value (Lifetime Value) measures how much revenue a customer generates during their time with the company. This metric has an important relationship with the CAC and understanding this relationship is fundamental to the creation of a sustainable company. If your CAC is R$ 100.00 but your LTV is R$ 90.00, it means that your company is growing without sustainability. The ideal for a startup to be considered successful is that your LTV/CAC ratio is at least 3x — the customer generates revenue of 3x what it cost. Companies like Hubspot and Salesforce have a LTV/CAC of 5x.

3. Churn: Metric used to measure the loss of business customers over time. SaaS companies (Software as a Service) — who sell softwares as a service with a monthly subscription — they are sensitive to this metric. This is because they are companies that have monthly recurring revenues and an increase in the level of cancellations implies a drop in revenues. To calculate the Churn of a company, it is necessary to divide the number of customers who canceled the service in the month observed, by the customer base at the beginning of the month. Example: if a startup you have 100 customers at the beginning of the month and you lose 5 of them during this period, the Churn Rate Observed is 5% a.m.

4. MRR: OR MRR (Monthly Recurring Revenue), Recurring Monthly Revenue, refers to the amount of revenue generated monthly, through a subscription model. In the article Valuation of Companies Through Multiples, a Comparative Analysis, a series of metrics attributed to the valuation of companies are presented, one of which is the MRR. Because it represents a revenue recurrence model, many startups are traded by this metric.

5. Burn Rate: Startups, at the beginning of their operations, they tend to have a high level of cash burning (Cashburn). To launch a product, they need to hire a Sales, Marketing, R&D team, etc., without even counting on cash generation to support all these costs and expenses. The metric of Burn Rate quantifies the cash deficit that the company will have in the course of its activities until the breakeven point is reached (Break Even), at which point your operation stops consuming cash. O Burn Rate it is normally analyzed on a monthly basis. For example, if the Burn Rate Of a startup It is R$ 50,000.00, meaning that, every month, it burns R$ 50,000.00 in cash.

Metrics should not just be a concern when raising funds in investment rounds. After defining which metrics to use, the next step is to monitor and discuss them periodically, involving all key business people, ensuring that the numbers are being collected correctly and reflecting the reality of the Company. Creating and analyzing metrics incorrectly can lead Companies to adopt erroneous strategies, reducing the ability to react assertively in relation to the problems encountered. Em startups, the ability to react and adapt to adverse situations are vital for continued operation.ARTICLE WRITTEN BY THOMAZ FONSECA — ASSOCIATE OF FC PARTNERSGo to our site: http://www.fcpartners.com.br