12 Tips for Choosing Effective KPIs

Scott Gerber

4 min. read

Updated October 24, 2023

With the ease of data collection in today’s technological landscape, it’s easy to get bogged down in performance metrics. But “more numbers” doesn’t always translate into a better understanding of what your company needs.

To figure out what Key Performance Indicators (KPIs) are most useful for a budding new business, we asked 12 entrepreneurs the following question: How should you go about selecting KPIs for a startup?

1. Avoid Vanity Metrics

It’s easy to look at numbers like pageviews, signups, likes, etc. But what you really need to ask yourself is whether any of these move your business forward. Vanity metrics are very risky because they often look good without any substance. Find those metrics that have direct correlations to your bottom line and the progression of your business, and you have your KPIs.
– James SimpsonGoldFire Studios

2. Look Beyond the Numbers

People can get caught up in the numbers, but quality is more important. KPIs are important, but they should be centered on quality and not just growth. The most important things in life and in business are not measurable. Becoming too obsessed with KPIs means important things that are harder to measure may fall by the wayside, hurting your business more than KPIs can help.
– Dan PriceGravity Payments

3. Ask Them About Their Vacation Time

Ask your key executives the following question: “If you were away on vacation for two weeks, what are the two questions you would ask to identify how your department is performing?” Their answers will provide you with a preliminary road map you can use to select your KPIs.
– Kelcy Pegler, JrRoof Diagnostics

4. Look at Similar Companies

Contact an investment banker, and ask how similar companies are being evaluated and acquired. Are they being valued on revenue, content, profitability or traffic? Look at financial analysts’ reports on publicly-held companies as they’re valued on future profitability or revenues. Understand how more experienced businesses, public or recently acquired, were valued, and backtrack from there.
– Luke SkurmanNiche.com

5. Let the Data Decide

A static set of KPIs will inevitably lead to missed signals from leading metrics that might have been valuable. Instead, create a system that collects all of your metrics but only shows you the ones that are performing particularly well or poorly. Consider tools like RJMetrics or Chartio. Then you can spend more time focusing on the root causes driving those metrics.
– Aman AdvaniMinistry of Supply

6. Tie Metrics to Actions

A good KPI points you to where you need to take action. If a change in your KPIs doesn’t inspire you to act, then you have the wrong ones. Examples of this are things like marketing ROI by campaign or sales performance by market segment. When you see changes in these indicators, it’s very clear what needs to happen.
– Robert J. MooreRJMetrics

7. Create External Progress Reports

We don’t do KPIs. We do, however, draft an investor newsletter every six weeks. Having to demonstrate progress to someone external on a regular basis is a huge motivator for the team.
– Ioannis VerdelisFleksy

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8. Look at It From the Customer’s Perspective

Looking at it from the customer’s point of view is the way to go. Measure the experience the client is having and what the prospect is going through. Then score it, pivot it, etc.
– Ilya BodnerThe Shipyard

9. Identify the Audience

First, identify the audience. KPIs are specific to the goal. I recommend having KPIs for customers, financials and any other stakeholders. For each of these, ask the basic question: “What are the three most important factors you would want to improve?”
– Ashish RangnekarBenchPrep

10. Start From the Top

Every startup has different goals. Some aren’t expected to generate revenue but are instead looking for investors, awareness or a target number of users. Once you make a decision on priorities based on these goals, think of KPIs like a funnel. The company’s high-level objectives are on top. They funnel down to each team and finally become the metrics that measure the success of individual team members.
– David Hassell15Five

11. Focus on Fewer Variables

I’ve seen KPI dashboards that have 17 different variables, thus making us question what was actually key and what was actionable. Choose the three to five variables that actually matter and that you can actually affect, either because you understand what drives them or have the capabilities on your team to change.
– Charlie GilkeyProductive Flourishing

12. Maintain Customer Satisfaction

The most important thing to get right when building an early-stage startup is maintaining great customer satisfaction, plain and simple. Revenue will follow if you have happy customers. Using a platform like Gainsight, which integrates directly into Salesforce.com, will help you focus on reducing churn, identifying any possible up-sells and driving adoption.
– Michael CostiganYouth Leadership Specialist

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Content Author: Scott Gerber

Scott Gerber

Scott Gerber is the founder of the Young Entrepreneur Council (YEC), an invite-only organization comprised of the world's most promising young entrepreneurs. In partnership with Citi, YEC recently launched BusinessCollective, a free virtual mentorship program that helps millions of entrepreneurs start and grow businesses.