Lean Analytics: Use Data to Build a Better Startup Faster (Lean (O'Reilly))

by Alistair Croll

A good metric is a ratio or a rate. Accountants and financial analysts have several ratios they look at to understand, at a glance, the fundamental health of a company.[5] You need some, too. There are several reasons ratios tend to be the best metrics: Ratios are easier to act on. Think about driving a car. Distance travelled is informational. But speed — distance per hour — is something you can act on, because it tells you about your current state, and whether you need to go faster or slower to get to your destination on time. Ratios are inherently comparative. If you compare a daily metric to the same metric over a month, you’ll see whether you’re looking at a sudden spike or a long-term trend. In a car, speed is one metric, but speed right now over average speed this hour shows you a lot about whether you’re accelerating or slowing down. Ratios are also good for comparing factors that are somehow opposed, or for which there’s an inherent tension. In a car, this might be distance covered divided by traffic tickets. The faster you drive, the more distance you cover — but the more tickets you get. This ratio might suggest whether or not you should be breaking the speed limit.