What Metric Defines Success for Your Start-up?

All you need is one…

Photo by Isaac Smith on Unsplash

The four of them stayed at the dining table, as was the custom every Friday night. With the completion of tea, it was time to review the takings and see how good the week had been. Tom, his wife Lin, who did the books — and their two young adult children, Jen and Gerald knew it had been a busy week.

Tom’s finger followed the line of figures down the page, as he checked to make sure nothing obvious was missing. The ledger listed the sales and expenses for the week, such as the way of accounting before computers.

Tom, looked up and paused, taking a breath before speaking. “So, last week’s figures…” he began. “Our sales were…and our expenses were…so our profit was £102.”

Minds were working quicker than Tom could read the figures out, as cheers of joy drowned out the last part of the declaration. It didn’t matter. Lin and Jen danced around in the room as the realisation hit them all.

They had done it. They had hit the one metric that mattered to them.

Starting a family business — a start-up

The family business was born in 1953. It began, as a side hustle. My grandad using his skills as a butcher to sell meat from a window display in a nearby shop during his spare time. Demand grew, and then as the shop owner decided to claw back the window, Tom, had a decision to make. He could stay as he was, working for a meat wholesaler, or sell the family home and buy a shop with a home above — one of which was available in a suitable location.

It was a period of growth of homes in the area, with new estates popping up like daffodils on a spring day. Tom felt a butcher’s shop would do well, and was keen to make the move, but not before a family discussion took place.

“With the new estates popping up,” he told Lin, Jen, and Gerald, “we have a good opportunity to make this business successful.” “But.” He paused, looking sternly at everyone. “If we do it, we all need to agree to do it together. It will be a family business.”

And so, in 1956 the family moved to their new home and opened the shop to a growing queue of customers. It wasn’t easy, but, as the housing developments grew, and new families arrived, so did the sales.

Metrics of Start-up Success

Early into this new venture, Tom set out some clear goals. A business wasn’t a business without profit, and this was to be the focus of the business. Paying the bills and breaking even wasn’t the end game — far from it, and so Tom set weekly profit goals.

As every Friday ended, so Lin would update the accounts ledger with sales and expenses, leaving Tom to assess the performance before tea. After tea, the family would linger around the dining room table to learn of the performance. Thereafter followed a discussion of what else they could do to hit the profit target Tom had set.

There was no glossy dashboard or automated accounting software to work it all out. Just the red ledger to capture and summarise the data.

The profit goal changed as the business grew. From £10 in a week to £25, then £50, and the £100 goal they had overcome.

It took the family ten years to hit the £100 profit in a week.

Of course, £100 doesn’t sound much, but in today’s money, £100 accounting for inflation makes it £1,500. Not turnover, or gross profit, but real money left over at the end of the week.

Lessons for today’s start-ups

Sixty years on and the world has changed significantly. The days of a family business opening a retail shop have long since gone, such as the shift to the online world we all live in. But, still to this day, the butcher’s shop lives on.

The tools the business uses to record sales and expenses have changed from the red ledger. Now its all-epos systems and accounting software, such is the power of the tools we now have.

The simplicity of revenue less costs equal’s profit has drifted into recurring revenue and delayed profit returns. Such is the complexity of modern business. Does a modern start-up have to be complicated?

I’m reminded of the KISS principle, an acronym which stands for, K.I.S.S — Keep in Simple, Stupid.

K.I.S.S — Keep in Simple, Stupid.

The US Navy developed the principle in the 1960s and it says most systems work best if kept simple rather than complicated. Simplicity should be a key goal in design, and metrics should be no different for a start-up.

One metric defines success.

Website visitors, conversion ratios, and turnover figures all limit our thinking, taking us away from what matters. One metric can gauge the impact of the metrics I’ve described, and it is the same one Tom used in his family business sixty years ago.

My advice and I suspect Tom’s advice would be the same. Have one metric, one goal, and focus on achieving it. It will define the success of your start-up.

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