The question “What do you want to be when you grow up” is a pain to answer for kids as it is for startup entrepreneurs. Most times you just dont know. Sometimes you ask other people in the hope that it will lead to an answer that you can co-opt. Other times it is not clear yet (unlike with kids) if you will ever grow up.
Even if you dont want to grow up, I’d still recommend you spend some time putting together milestones that matter to your company for an 18-24 month period from when you start so you know what you are shooting for.
The milestones fall into many buckets, but they should answer the question:
“If you hit the milestones you set out for your company, would you be much more valuable as a startup than you are now”?
The relative sense of “much more valuable” indicates that this is very different for each company, founder, market and type of startup. Most entrepreneurs who are focused on B2B bemoan that they are measured to revenue metrics, compared to their B2C counterparts who usually are measured on user growth (or engagement).
Regardless of what you are measured on, the key is to ensure that you document the most important metrics that will move the value of your startup.
So, to set milestones, the first step is to agree on metrics to measure, and then the date by when they will be achieved.
Here are some examples.
1. Revenue metrics. Regardless of what the new “temporary” trend might be, revenue and profit trumps all. In the early stages of your company, profit will be an illusion, so I would focus a lot on revenue growth. How quickly you grow revenue and have reduced churn, better predictability and more diversity gives an investor more confidence in your business. If you need to have one metric alone in place I’d recommend a revenue growth metric. As in most things, quality and quantity of your revenue metric matter.
2. Absolute # of customers / users metric: In some cases, when the revenue is not significant initially (for example you are in the razor blades and razors model of a business) then I’d focus on growth in # of customers. Again, like the previous metric, quality and quantity both matter. If you are an enterprise software business, getting the initial key marquee customers matters more than any customer. In B2C, this is widely followed with startups tracking # of users, MAU, DAU, or engaged users, or a proxy for # of users (# of snaps sent for example).
3. # of employees: This used to be a metric people tracked, but I am not sure this really matters as much in terms of growth. I’d focus more on the quality and profile of employees alone, instead of a growth in # of employees,. If, however you are in a consulting or services business and this metric drives revenue, by all means this becomes important to track.
There are many more metrics you could track, but the key question you have to answer is “Will this metric(s) drive my startup’s value higher. You can also track metrics that are a proxy for the metrics I listed above. This is so that you can communicate it externally and get people excited about it, instead of having to share a revenue metric.
In some cases, (like Uber for example) the # of rides as a proxy for revenue might be tracked.
Then the next part after you select the metric, (typically one is preferred) is to draw a line in the sand for those metrics –
What would those numbers be and by when would you achieve them.
This part is the “setting milestones”. It has to come with a “sell by date” or “achievement date”.
Simply setting metrics alone, without the date of achievement is typically useless.
The important next steps is to break down the milestone into smaller more achievable milestones during your progress (monthly, quarterly, etc.). This is so you can communicate with your team and have them all rally behind the milestone.