The Right KPIs Matter

0:00 Welcome back. We're going to talk about numbers. I know we talk about numbers and metrics on this video a lot. And it's not just because our firm name is MATH Venture Partners. You see, it's because we believe the companies that are metrics driven fundamentally outperform. Now that's really easy to say, but it's much, much, much harder to do. And so I'm going to give you an example of KPIs that I think will help a company perform today to make a difference.

0:29 it really concrete there's a e-commerce company that i've been helping it's not one of our

0:34 portfolio companies just somebody i've been helping and we totally revamped their KPIs

0:39 and i want to share with you what happened you see they used to track two primary KPIs the first one

0:45 was the number of instagram followers they had kind of top of funnel how many people are aware

0:49 of us and the second one is their weekly sales dollars seems reasonable but i think we can do

0:55 much better so as we revamped these we came up with three KPIs and those three KPIs are a top

1:01 of funnel a middle of funnel and a bottom of funnel the top of funnel we got rid of the vanity metric

1:06 of how many instagram followers we had and we moved it to be a very actionable and measurable number

1:13 the number of unique people who visit my website each week unique visitors okay the second piece

1:21 the middle of funnel we changed from weekly dollar sales to the number of new customers who bought

1:28 from me this week now three things about that the first is that i went from dollars to number number

1:34 of customers the second is i'm only counting the new customers i'm not even counting the existing

1:39 customers and the third is that wait a minute how is that middle of funnel if they made a purchase

1:44 purchase. Well, that comes to the bottom of the funnel, the third KPI. And the third KPI

1:51 is the percentage of people who are eligible to repeat purchase who did this week. Repeat

1:58 purchases. You see, I don't consider them a great customer until they've made more than

2:03 one purchase. That's the bottom of the funnel. And I want to point out something subtle about

2:08 the metrics that we chose for the bottom of the funnel. It's not the percentage of purchases

2:13 this week that were repeat purchases. That's a common one I see, and that one's problematic

2:18 because other things affect that number. For example, if you want to win on that KPI, you can

2:23 just shut off all new customer sales. You'll have 100% repeat purchases. That's great, except you

2:30 had no new customers. Conversely, by the way, if you had an amazing ad campaign that went viral,

2:34 it may squish the percentage of repeat customers down compared to that new viral campaign. Again,

2:42 giving you an erroneous number. But if you always look at the last six weeks of people who first

2:48 time purchases, what percentage of them purchased this week, it's independent of the new sales.

2:53 It's a metric that will be consistent and that you can consistently work on improving.

2:57 So at the end of the day, if this company nails these three numbers, the number of people who

3:03 are visiting the site, Unix, that week, the number of new customers acquired that week,

3:09 and the percentage of the eligible new customers from the last six weeks who repeat bought.

3:17 If you increase each one of those three metrics, you're going to hit this out of the park.

3:22 And the reason this is so important is that I believe that entrepreneurs are inherently smart and tenacious.

3:28 And if they're given the right goals, they're going to meet or exceed those goals.

3:33 And so it's so critical that you figure out what goals you actually want to exceed.

3:37 Hopefully this gives you a little bit of insight as to how to set your KPIs, how to create

3:44 the right ones that will help you beat your numbers.