When your startup is small, it is easy to gauge its health. From your vantage point as the company's leader—and perhaps its only employee—you can readily track the arrival and departure of customers, the growth or decline of revenues, and changes in profitability as costs rise or fall. But as your company grows and its complexity increases, measuring the success of the business becomes more difficult. It is important to develop a well-thought-out set of metrics, or measurement tools, and to apply them consistently.
In Chapter 12 I discussed the basics of financial accounting, which provides a crucial set of metrics that every business founder needs to understand. Now we're going to extend our metrics tracking with some of the measurement tools and techniques that you will use in the second phase of the lean startup cycle: Measure. These are designed to provide methods so you can quickly and easily monitor the changing levels of success experienced by your startup as you build and iterate on your product.
Use Your MVP to Establish Baseline Metrics and Begin Experimental Improvements
Creating a minimum viable product (MVP) is the best way to test the validity of your business plan with real-world customers. By offering the MVP to customers through sales and marketing channels like those you plan to use when your business is fully operational, you can determine whether there is a real market for your product—and whether you need to retool ...