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

by Alistair Croll

Define an active user. What percentage of your users/customers is active? Write this down. Could this be higher? What can you do to improve engagement?

There’s a risk that you build virality and word of mouth at the expense of engagement.

Or maybe your unique value proposition is getting lost in your marketing efforts, and your new users have different expectations from earlier ones.

Table 20-1. What metrics matters depending on your business model and stage

They serve as a sobering reminder that being average simply isn’t good enough.

Consider this: if you get your churn rate below 5% — ideally as low as 2% — each month, you have a reasonably sticky product.

At Paul’s startup accelerator, Y Combinator, teams track growth rate weekly because of the short timeframe. “A good growth rate during YC is 5–7% a week,” he says. “If you can hit 10% a week you’re doing exceptionally well. If you can only manage 1%, it’s a sign you haven’t yet figured out what you’re doing.”

if it’s not charging money yet, growth is measured in active users.

Most Y Combinator startups (and most startups, for that matter) focus on growth before they hit product/market fit.

30% of registered users will use a web-based service at least once a month. For mobile applications, 30% of the people who download the app use it each month. 10% of registered users will use the service or mobile app every day. The maximum number of concurrent users will be 10% of the number of daily users.

Getting to this stage of regular use and engagement is a sign that you’re ready to start growing, and to move into the Virality, Revenue, and Scale stages of your business.

Aim for 30% of your registered users to visit once a month,

and 10% of them to come daily.

If you make your pricing tiers simple, you’ll see better conversions.

Enterprise buyers tend to be more regulated. They can’t make decisions on gut or emotion — or rather, they can, but it has to be justified with a business case. Big companies are often public companies with checks and balances. The person who pays for the product (finance) isn’t the person who uses it (the line of business). Understanding this dichotomy is critical for product development and sales. Initially, you may target early adopters, where the buyer is much closer to the user (they may be the same person at this point), but as you move past early adopters, the buyer and user diverge.

a domain expert and a disruption expert.

The domain expert knows the industry and the problem domain. He has a Rolodex and can act as a proxy for customers in the early stages of product definition.

Many bootstrapped startups begin their lives as consulting organizations.

Consulting is a good way to discover customer needs, and it helps pay the bills.

Launching a startup as a consultancy has its risks. It’s easy to get trapped in consulting.

Once you know the need and have identified your initial segments, you have to standardize the product. With some products, it’s possible to sell before building. Instead of an MVP, you may have a prototype, or a set of specifications for which the prospect will commit to paying on delivery.

This pipeline of conditional purchases reduces the cost of fundraising, because it increases the chances of success.

In the B2C world, startups worry less about “Can I build it?” and more about “Will anyone care?” In the enterprise market, the risk is more, “Will it integrate?” Integration with existing tools, processes, and environments is the most likely source of problems, and you’ll wind up customizing for clien...

Because enterprises don’t trust newcomers, you’ll rely heavily on referrals and word-of-mouth marketing.

You’ll make case studies from early successes, and ask satisfied users to handle phone calls from new prospects.

Referrals and references are critical to this stage of growth. A couple of household names ...

Enterprise-focused vendors will often provide discounts in exchan...

With the pipeline growing and revenue coming in, you’ll worry about cash flow and commission structures for your direct sales team. To know if you have a sustainable business, you’ll also look at support costs, churn, trouble tickets, and other indicators of ongoing business costs to learn just how much a particular customer contributes to the bottom line.

Feedback from the sales team and the support group is critical at this point,

(which won’t be sustainable in the longer term).

In the final stages of an enterprise-focused startup, you’ll emphasize scaling. You may have channel sales through value-added resellers and distributors.

You’ll also have an ecosystem of analysts, developers, APIs (application programming interfaces) and platforms, partners, and competitors that will define and refine the market.

Ease of Customer Engagement and Feedback

As you’re talking to customers, how easy is it to get meetings with them? If you plan to use a direct sales organization later on, this is an early indicator of what it’ll be like to sell the product.

Pipeline for Initial Releases, Betas, and Proof-of-Concept Trials

It’s important — right from the very beginning — that you articulate the stages of your sales funnel and the conversion rates at each point along the way. The sales cycle needs to be well documented, measured, and understood after the first few sales, to see if you can build a repeatable approach.

No matter what you’re building, the most important metric is whether people are using it.

You may also have to refrain from talking to users: it’s easy to pop up a survey on a consumer website, but employers may frown upon you using up their employees’ precious time to answer your questions.

And try to get your ‘C customers’ to be customers of your competitors.”

If your business involves big-ticket sales, you may have few enough customers that you can get many of them in the same room.

Even with a large number of customers, Zach says, “Identify the real advocates and bring them in for a big hug.”

He also suggests helping advocates network among themselves, which Rally does on its website.[

As you bring customers on at scale, you want to make them stick around. A vibrant developer ecosystem and a healthy API allow customers to integrate themselves with you, making you the incumbent vendor and helping you to counter threats from competitors and new entrants.

If you have an API, track its usage by clients. Those clients who have a lot of API activity are investing more in extending their relationship with you;