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How To Measure Start Up Success

This article by Kachwanya got me thinking. The pressure to report high revenue / profit figures makes most start ups exaggerate the figures to appear successful, raising credibility issues on the entrepreneur and the publication that runs the story. My comment on that post was to the affect that instead of asking journalists to start measuring success differently, maybe start ups need to redefine their success, and proudly so. Don’t get me wrong. Money and profits are a good measure of success in business. They are the main reason why we call ourselves entrepreneurs, otherwise we would all be running NGOs. At some point, every business needs to start making profits or it will shut down. However, if a start up is not yet making money worth talking about, there are other indicators of growth and success worth talking about. In any case, a discerning reader does not expect a start up to be making mega profits. The reader wants to know if your business has potential for growth, and maybe lessons learnt.

First, funding raised is something worth talking about though it is not my favourite measure of success. When a start up raises funds, it means that it has convinced someone other than the founder that the business can be viable. While we have seen many businesses fail after successfully raising funds, that is something. In addition to funding, it is important that your business  provides a solution to an existing problem. This does not have to be a complicated problem. It can be as easy as providing good customer service, or convenience in a sector where the two are not valued, for example garages / motor vehicle repairs.

Your business must also be sticky. People must consistently need the product or service you are providing and they must need it enough to be willing to pay you to use your service or product. A lot of the tech solutions I see do provide a solution to an existing problem, but it is hard to build a case on why someone would want to pay for it. An app displaying traffic jam information for example will be useful in Nairobi, but will people want to pay for it? And if not, are there things people can pay for that can ride on that app? This second bit is something gamers do excellently. They know you will probably not pay for their game, but by creating a highly addictive game, they’re able to attract advertisers and advertising revenue. This is what the infamous Flappy Bird creator did, and by the time he took the game down, he was earning over $50,000 daily.

Succession and sustainability  are also markers of business success.  Are you building a business that will continue to exist if market conditions change? What if you died today? Would your business continue to exist without you? A less morbid scenario, if you were hospitalised for 3 months, would you find your business still running? In most start ups, the founder does everything because of lack of funds, or because the founder believes he/she knows best. As your business grows, you need to wean it you and get a staff team that can keep things going if you have to be absent.  On a larger scale, seek to build a legacy that outlives you. When talking about legacy, you can discuss your staff growth plan and strategy around this.

So next time someone asks you how much your start up has made, you can use any of the above measures to let them know that even though you haven’t made much money, you are hopeful of growth because…

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May 6, 2014 General Modified 10 yearsago

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The aim of this blog is to simplify personal finance.
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