Many startups fail because they set the wrong goals. Most agree your startup will need goals, but if you’re setting bad goals, you can put in a lot of effort without satisfying customers. Here’s how to avoid some common mistakes.
No Chance to Learn
Get as many rounds of feedback as you can.
- Aug 15 — Complete Basic Mobile App
- Aug 30 — Complete Extra Sound Effects
- Sept 19 — Complete Testing
- Sept 20 — Release v1.0 to Customers
- Aug 20 — Complete Basic Mobile App
- Aug 21 — Release v0.1 Beta Customers
- Aug 25 — Collect Feedback
- Sept 5 — Implement v0.2 from Feedback
- Sept 6 — Release v0.2 to Beta Customers
- Sept 10 — Collect v0.2 Feedback
- Sept 20 — Implement v0.3 from Feedback
- Sept 21 — Release v0.3 to Beta Customers
- Sept 25 — Collect v0.3 Feedback
Until your product is in customers’ hands, it’s just a hypothesis of what people want. Customer reactions are unpredictable and satisfying their needs may require wholesale changes. In the better example, customer feedback governs roadmap decisions after the first release and each release cycle is shorter to maximize the amount of feedback.
However, breaking projects down into small, releasable chunks is not free and will add significant time to the expected ‘final’ delivery date. This is an acceptable cost, because customer feedback will get you closer to the solution with each new release. To use a golf analogy, you have to be very good (and lucky) to sink a ‘hole in one’ but it’s much easier if you take 10 strokes. Each attempt takes you closer and closer to the hole.
Goals that aren’t Measurable
Use measurable goals to track real progress.
- Complete successful customer training for Acme Bank
- July 5 — Complete training for 10 end users at Acme Bank
- July 6 — Collect 5 end user surveys from Acme Bank
- July 10 — 3 daily active users from Acme Bank
Using numeric goals quantifies the amount of success expected for a goal. There’s often disagreement if a goal is done, or not, as people have different definitions of success and words like ‘complete’ don’t offer much clarity.
By providing more visibility into customer behavior, these goals also push you to focus on the indicators of real progress. A fintech startup I know recently acquired their first Banking customer. The Bank CTO sponsored the process and the User Training day went well but nobody at the bank is using the product because the employees have a workaround for the problem and aren’t willing to change their behavior — their solution already works. In this case, the bad example above would still look successful, even though the training generated no new users.
Ignoring Important Metrics
Revenue is important but you need engagement too.
- July 31 — $75k Monthly Revenue
- July 31 — $75k Monthly Revenue
- July 31 — 3,000 Daily Active Users
- July 31 — 50,000 Daily Messages
‘Focus on revenue’ is a common, and valid, thread in startup advice but it shouldn’t be your only goal. Revenue is a trailing indicator of success, so your product could be losing users without a corresponding loss in revenue as customers can pay for software they don’t use (especially when it’s under contract). If this happens, sooner or later you’re going to experience a lot of churn.
This problem tends to emerge as a startup grows. I recently spoke to the founder of a very successful startup who felt trapped in this situation. Their revenue growth was strong as the sales team continued to deliver big deals but daily active users was flat and their NPS was declining. He felt trapped because they couldn’t prioritize the small fixes to make customers happy as the team was busy building new features to expand their market. If engagement is a company level goal, the team’s viewpoint will change. You make what you measure, so measure the details that matter.
It takes a lot of discipline to consistently set numeric goals in advance of a release, knowing you’ll be accountable later. It’s tough to give up your personal roadmap plans, in favor of customer feedback leading in a different direction. It’s difficult to highlight your business’ flaws, when there’s top line indicators of success. However, if you are willing to face these hard truths, you’ll have a much better chance of beating the odds.
This article is part of a series on Startup Growth.
How to Understand your Customers Before Launch
Your First Product Should Be Terrible
A Simple Framework for Goal Setting
Bad Ways to Set Startup Goals
Hit Goals or Your Startup Will Die
How to Get 10% Weekly Growth
Finding the Right Price for Early Customers
Which Pricing Model is Best for Your Startup?
When Should Startups Pursue Partners?
Early Traits of a $100M Company
Sterling Road invests in pre-seed B2B startups based in North America. Full process here: sterlingroad.com/process.
You can reach me here: firstname.lastname@example.org
Thanks to Sean Byrnes, Ryan Pfeffer, Joshua Levy, Duncan Davidson, Garry Tan, Pejman Nozad, Mar Hershenson and Ajay Kamat for reading drafts of this.