What’s the best way to measure your company?

Paul Graham (Co-Founder & Partner at Y Combinator)
Do Things that Don’t Scale

If there’s one number every founder should always know, it’s the company’s growth rate. That’s the measure of a startup. If you don’t know that number, you don’t even know if you’re doing well or badly. The best thing to measure the growth rate of is revenue. The next best, for startups that aren’t charging initially, is active users.

David Jackson (Founder, Seeking Alpha)
How to choose the one metric that matters | A Founder’s Notebook

When picking a key metric, think through the incentive effects. By optimizing for this metric, what will we do? What will we not do?

Eric Ries (Author, The Lean Startup)
The Lean Startup: How Today’s Entrepreneurs Use Continuous Innovation to Create Radically Successful Businesses

If you are building the wrong thing, optimizing the product or its marketing will not yield significant results. A startup has to measure progress against a high bar: evidence that a sustainable business can be built around its products or services. That’s a standard that can be assessed only if a startup has made clear, tangible predictions ahead of time. In the absence of those predictions, product and strategy decisions are far more difficult … (read more)

David Jackson (Founder, Seeking Alpha)
Why cash flow, not profits, determines shareholder returns | A Founder’s Notebook

Cash flow, not profits, determines shareholder returns.

Fred Wilson (Co-Founder and Partner at Union Square Ventures)
Profits vs Growth – AVC

These experiences lead me to question the orthodoxy in the world of technology that says if you are not investing heavily in growth (and losing money), then you are not maximizing the potential value of your business over the long haul. It doesn’t have to be that way. Now maybe you need to have a very special company that has real structural competitive advantages in the marketplace to avoid this tradeoff. Or maybe you just need to be a really sh… (read more)

Seth Godin (Founder at Yoyodyne Entertainment)
Seth’s Blog: On average, averages are stupid

On average, averages are stupid. “Across our 100 locations, sales on average are up 3% last month.” This tells you exactly nothing. It turns out that ten of the outlets each saw their sales double, while most of the other ones are stagnating or even decreasing in sales. That’s the insight. Averages almost always hide insights instead of exposing them. If the problem is interesting enough to talk about, it’s interesting enough to show the true gro… (read more)

Fred Wilson (Co-Founder and Partner at Union Square Ventures)
Profits vs Growth – AVC

I also think the profit motive, generating more revenues each year than the expenses you are spending to do that, is a really valuable constraint on a management team. It forces them to think creatively and logically about the investments they want to make. It roots out bad investments in people, product, sales, marketing, and elsewhere in the business and helps to maintain a lean and mean highly functioning organization.

Fred Wilson (Co-Founder and Partner at Union Square Ventures)
Profits vs Growth – AVC

Your year over year growth rate plus your pre-tax operating margins need to be at least forty percent. Meaning you can grow at 100% per year and have operating margins of -60%. Or you can have flat growth and have 40% operating margins. Or you can grow at 20% per year and have 20% operating margins. There is no magic to the forty percent target, but I do like establishing some relationship between acceptable levels of profitability (or losses) an… (read more)

Eric Ries (Author, The Lean Startup)
The Lean Startup: How Today’s Entrepreneurs Use Continuous Innovation to Create Radically Successful Businesses

…three A’s of metrics: actionable, accessible, and auditable. Actionable metrics …When cause and effect is clearly understood, people are better able to learn from their actions. [Accessible]…make the reports as simple as possible so that everyone understands them.

Paul Graham (Co-Founder & Partner at Y Combinator)
Startup = Growth

The growth of a successful startup usually has three phases: (1)…an initial period of slow or no growth; (2) As the startup figures out how to make something lots of people want and how to reach those people, there’s a period of rapid growth; (3) Eventually a successful startup will grow into a big company. Growth will slow…The phase whose growth defines the startup is the second one, the ascent. Its length and slope determine how big the com… (read more)

Paul Graham (Co-Founder & Partner at Y Combinator)
Startup = Growth

A startup is a company designed to grow fast. The only essential thing is growth.

Paul Graham (Co-Founder & Partner at Y Combinator)
Startup = Growth

If you want to understand startups, understand growth. Growth drives everything in this world.

David Jackson (Founder, Seeking Alpha)
The best startup metric: Conversion rate? | A Founder’s Notebook

Bill Gurley says conversion rate, which measures the number of visitors who come to a particular Web site within a particular period divided into the number of people who take action on that site (purchase, register and so on), is the most important metric.

Fred Wilson (Co-Founder and Partner at Union Square Ventures)
Valuation As A Scorecard – AVC

Don’t let yourself get sucked into a world where a number is your measure of self worth. Because you don’t control that number. The market does. And some days the market is your friend and other days it is most decidedly not your friend. Measure yourself on whether your employees are happy. Measure yourself on whether your customers are happy. Measure yourself on how much free cash flow your business is generating. Measure yourself on how your br… (read more)

Slava Akhmechet (Founder at RethinkDB)
57 startup lessons

Sales fix everything. You can screw up everything else and get through it if your product sells well. Product comes first. Selling a product everyone wants is easy and rewarding. Selling a product no one wants is an unpleasant game of numbers.