StratifyPro was a startup conceived by the founders of VNCTech Group not too long ago. With decades of experience across each of its founders, we understood very well what measuring and tracking KPIs would be to the success of our startup. We developed this article as well as balanced scorecard templates designed especially for startups and now sharing it with everyone. Although you can use these scorecard templates and articles as is, it is highly recommended you use the StratifyPro platform to help accelerate and organize your strategy - especially as you scale your business (you can start StratifyPro for Free - get a demo).
The following is what we will focus on in this Balanced Scorecard and KPIs for Startups article:
KPIs that a startup needs to track once it passes the “idea” stage (and into pre-seed or beyond - Series A …).
A single strategy map view for your startup
Using the Balanced Scorecard methodology to communicate to the next level for investors, boards, customers and internal leaders and teammates.
How is This “Startup KPIs” Article Different?
We all say it - “The ideas are the easy part, executing is the hardest”. When founders of a startup get past the idea phase, it’s time to get serious about business plan objectives, how to create a plan to achieve objectives, and how to know the objectives are working. KPIs are key to successfully discovering and meeting your startup’s goals and objectives.
But KPIs for a startup need to be carefully selected and implemented - and if done incorrectly can actually hurt progress. Hence we decided to develop this article along with our pre-filled scorecard especially designed for startups, to help aspiring entrepreneurs be successful. Why is this article "Balanced scorecard and KPIs for Startups" different from others you might find online or in social media? Here are a few reasons:
Teaching you how to fish. I used this term a lot as a consultant. You will learn about a few very useful KPIs; but also you will ”learn how to fish” - which means you will be able to implement this over and over on your own. So as you go along through this article, we will answer the “why” questions, providing relevant guidance so you know how to implement on your own.
Personal experience. Our founders have been through startups, including VNCDesigner. Our founders have also been full time leaders at over 15 companies helping hundreds more over the decades plan and execute strategies through 3 major paradigm shifts in business and technology. These KPIs we provide in this document helped us achieve our objectives. So essentially, for each KPI we are sharing the approach that we used at StratifyPro to measure and track that KPI.
Our Founders background with KPIs. StratifyPro founders engage in the topics of performance measurement, strategy and execution - and we take it very seriously– writing books, articles, and managing software companies, leading dozens of companies as senior executives and consultants with our own KPIs/strategy scorecards - “eating our own dog food” - which means, using and doing what we preach.
What are Key Performance Indicators (KPIs)?
Key performance indicators are values that companies can use to measure their growth and determine areas of improvement within their operations. Startup companies may use key performance indicators to help them increase their brand awareness, boost their sales and help sustain their finances. Key performance indicators also allow companies to gauge their success and estimate their future financial health.
Why are KPIs Important for Balanced scorecard and KPIs for Startups?
It really is never “too soon” to start using KPIs with your startup company - hence the reason we developed this plan focused on balanced scorecard and KPIs for Startups. In fact, data proves, the sooner you use (the right) KPIs to measure growth and determine areas of improvement, the better your startup will flourish. Here are some reasons it's important for startup businesses to use key performance indicators:
Show growth: Using key performance indicators can give startup companies insight into their recent progress, which allows them to estimate future growth. They may look at their most recent cash flow statements and monthly burn value to determine the rate at which they may grow in the upcoming sales period.
Identify areas of improvement: Key performance indicators allow startup businesses to recognize areas of improvement within their business model. For example, if a company recognizes that it has a low runway, then company staff may conduct fundraisers to increase their workplace's runway and help it sustain growth for a longer period of time.
Give investors insight into sales potential: It's important for startup companies to gain investors to grow their business and expand their budget. Key performance indicators allow investors to identify a startup's financial forecast and determine if they want to invest in it or not.
What KPIs Should a Startup Company Track in their Balanced scorecard and KPIs for Startups?
Before thinking about metrics & KPIs, Founders of Startups need to formulate questions that matter for their company as it exists today. At StratifyPro, we developed our questions into these 5 “categories” and would like to share it in our article on Balanced scorecard and KPIs for Startups:
Attracting Prospects
Engaging Users
Client Value
Retaining Clients
Economics
Here is at least 1 question for each category that can be used by most startups (once you’re past the idea stage):
How good are we at attracting prospects?
How good are we at engaging users?
How much value do we create for our clients?
How good are we in retaining clients?
What is our economic sustainability?
At StratifyPro, our approach was fairly simple - we wanted to attract many selected prospects to our website, get into engaging strategy conversations with the key users, convert those users into paying clients, and retain our paying clients by having the best products.
Let’s see how we can quantify these questions and this approach by diving deeper into the following chart.
1. Attraction KPIs
The first part of the chart on the left is about attracting prospects to your product. The more “foot traffic” attracted to your website, the better. Audience members become aware of your brand and company, starting on what will hopefully be a long-term buyer’s journey. Of course, traffic is welcomed!
However, it’s also important to know where your traffic is coming from. Knowing the origin of your audience will guide your marketing strategies and give you better insight into who your leads are and what they’re interested in.
This section is about defining the right KPI(s) that quantify how good your company is in attracting prospects (clients). We recommend for Startups to track at least 6 different types of attraction metrics that fall into the category of “Traffic KPIs”.
Traffic KPIs (Organic, Direct, Paid, Social, Email, Referral)
We recommend for most Startups to track at least 6 different types of attraction metrics that fall into the category of “Traffic Metrics”.
Organic Traffic KPI
Organic traffic measures how many visitors come to your website from organic search results - which specifically means from unpaid search engine results (as opposed to paid results) where users who find your site through a search engine.
Organic traffic is directly related to your website’s search engine optimization (SEO). The higher your website’s SEO is, the more search engines will present your website to searchers. As such, your website becomes an organic search result, and the people who click on your website become organic traffic. To increase your website’s organic search traffic, you need to achieve high organic rankings in the search engine results on sites like Google, Bing, and Yahoo.
It's one of the most important metrics to consider, as its growth denotes you reached the main SEO objective: growing the number of people seeing and visiting your website.
Direct Traffic Metrics:
Direct traffic is the number of visitors who come to your website in any way that is not through a referred, outside website. The short version of the answer to the question “What is direct traffic?” is anyone who types in your website URL directly into a browser.
Direct Traffic is very complex and needs to be measured correctly. If you are using this KPI be sure you understand common causes of direct traffic and have the ability to filter out what you feel you don't want to count. Here are a few that you need to be able to manage of measuring direct traffic and want accuracy:
Internal employees: As a rule of thumb, you should filter out all company IPs from web analytics.
Customers: Do your customers log into a customer portal on your site? This is often a source of direct traffic. In this case, you do not want to completely filter out the traffic but instead set up different views within tools like Google Analytics to view web analytics without this traffic. StratifyPro can interface with google analytics for automatic updates to keep your strategy scorecard up to date with the correct information.
Actual direct traffic: These people enter your URL into their browser or find you via a bookmark. There’s nothing you can do to dig deeper into this—just embrace the fact that users actually know your brand.
Emails from particular email clients: It’s quite common for email clicks from Outlook or Thunderbird to not pass on referring information. You can typically identify whether an email caused a spike in direct traffic by analyzing traffic around the time a particular email was sent.
Mobile traffic: In short, as mobile users grow, we are likely to see direct traffic rise even more from organic search traffic so you want to make sure you have this set up correctly
Clicks on mobile apps or desktop software: Programs such as news apps often do not pass on referring information and, thus, result in direct traffic. The best way to capture and analyze this further is to understand where your site links, including apps, might be commonly used or placed digitally.
Secure (HTTPS) to non-secure sites (HTTP): Since Google began emphasizing the importance of having a secure site, more websites are securely hosted, as indicated by the “https” in their URLs. Per the security protocol, however, traffic going from a secure site to a non-secure site will not pass referral information. You can address this issue by updating your site to be secure through a third-party SSL certificate.
When you look at your overall website traffic, a healthy amount of direct traffic is about 20 percent. However, with major web shifts disabling marketers from tracking the true traffic source, we will likely see this percentage rise.
Paid (Search) Traffic:
This happens when you pay for your company’s advertisement to be seen by a target audience, oftentimes leading a user to a landing page. For example, traffic from search engine results that is the result of paid advertising via Google Ads or another paid search platform.
Social Traffic:
This happens when a user accesses your website from a social media platform, such as LinkedIn, Facebook/Meta, or Instagram.
Traffic from email marketing that has been properly tagged with an email parameter - easy to measure!
Referral Traffic:
This is any traffic you obtain from a source outside of a direct URL search or search engine result.
Other:
If traffic does not fit into another source or has been tagged as “Other” via a URL parameter, it will be bucketed into “Other” traffic
Registrations:
The number of registrations is a direct result of foot traffic. It's important to understand what type of foot traffic outlined above contributed to the registration so you can modify your marketing so you see more successes (and failures) of different approaches.
Attract - Our StratifyPro Approach
As a startup, StratifyPro started out actively doing content marketing, so our main traffic source at that time was organic visitors so we heavily focused on organic traffic KPI to make sure we were hitting expected targets. It turned out most of our registrations were obtained from organic traffic.
NOTE:
One of our goals of our customer development strategy was to understand what a better customer journey would look like. For example, as we gained customers of our Free program, we started tracking the average time from the first using (free) StratifyPro to a paid subscription, and this metric helped to adjust customer acquisition strategy.
We also started seeing referrals and direct KPIs increase and also becoming a source of higher registrations - this told us we many of our organic customers were saying good things about our products so word of mouth was effective.
2. Engagement KPIs
In basic terms, user engagement is the amount of time users spend on the site and what they are doing on your site (before and after registering).
When users are engaged with your site, they’ll spend more time sharing your content, signing up for free offers, and eventually seeing value to actually make purchases—strengthening your customer base and helping your business grow.
As a SaaS Startup, you want to engage users that visit your site enough to at the least register for a free offering, beta or MVP. And after they register, you want to know how they are engaging with the product such as if they are using key functions or not. By understanding and measuring user engagement, you can stay on top of what keeps visitors active on your site—and act quickly if their interest starts to fade and/or when they are activating key functions.
So how good do you think you are in engaging users to register and use your products? Let's discuss how to keep track of the degrees of user engagement by implementing the right KPIs.
Conversion rate into free accounts, BETA or any other offering
If you're a SaaS, a free program or offering is one of the most effective ways to generate leads, engage users, and convert users into paying customers. But before you convert a user into a paid subscription, it’s likely you need to get these users to register for a free program and/or beta and/or offering. There are various ways to accomplish this and this metric will measure the effectiveness of your methods by measuring the % of prospects that register for a free subscription and/or beta program.
% of clients who unlocked key functions of the product
As users are trying out the free version of your product, you want to know how deep they are digging into the functionality of your product because that becomes a leading indicator to see whether they want to be a paying customer. You want to know the customers that are digging deep into your products and those that aren't (and why).
This metric focuses on the % of clients who are unlocking key functions of the product which becomes an indicator to faster paid conversions in the future.
Feedback obtained, meaningful conversations
As noted, you also want to know what and what they are doing. Engaged customers who registered for a free version/BETA and unlocked key functions will likely also provide feedback that is specific, timely, relevant, and actionable. As a startup, use the feedback obtained from customers to help identify product strengths and areas for improvement. You can create specific development plans with feedback that support product growth and focus on the customer needs. Use feedback to start having meaningful conversations with your engaged customers - this increases their confidence and competence in using your product, and commitment to your strategy and product - a lively customer is an engaged customer who will convert from free usage to paid.
Additional Feedback Metrics
Try these additional metrics as well:
Website metrics (bounce rate, time on site)
Social engagement metrics (likes and shares)
Mail list metrics (CTR, open rate)
Returning users rate
NPS
Engagement : StratifyPro Approach
We track the percent of “engaged” accounts from startup days to today. In our case, an engaged account is one where the user of our free program created at least one scorecard (a key function) and unlocked the potential of certain other key functions in that scorecard (i.e. linking goals, cascading goals, sharing scorecard with team). We look for at least one of these where customers are unlocking certain functions - this indicates we have a very “engaged” user and a likely candidate to convert to a paid subscription.
For those users who do not unlock certain functions; We do many interactions trying to understand the blocking points that prevent users from unlocking the value of the product. In our case, the response was to improve the following:
Detailed video tutorials for all functions of the product
Regular Live training of all aspects of VNCDesigner
Onboarding Wizard that significantly increased onboarding effectiveness and ease
We were able to correct the product and the support services due to meaningful conversations with both engaged and “unengaged” users - and this never ends.
3. Value KPIs
Customer value can be tricky to quantify, but how your customers value your products and services will affect their loyalty to your brand - this is especially important for a startup getting past the idea and MVP phases. Providing useful products and services for your customers can encourage sales, improve customer loyalty and grow your brand's reputation. Creating value for your customers has a direct impact on your company's long-term success - and this must start from the early startup days by tracking and quantifying Value KPIs. We will discuss the various parts of “customer value” later in this document as we get into retaining clients and keeping churn rate down. For this part of our KPI journey, we want to make sure we can measure and track the result of customer value …
At the end of the day, the result of value is easily quantified in paid subscriptions and revenue.
Paid Subscriptions
This is straightforward and easy to measure. It should be measured in 2 ways:
The % of users who register for a free program that are converted to paid subscribers
The % of users who were never registered for a free program and had become a paid subscriber
You want to look at both of these because the data can be used later for various marketing purposes.
Other good KPIs (Depending on your Business Model)
The time users spend in VNCDesigner training programs: LIVE and Video on demand training.
The time users spend daily interacting with your product: The daily hours free program users are interacting with the product
Referrals: % of paid subscriptions coming from referrals using free trial
Newsletter subscriptions: % of prospects signed up for newsletter
Leading Indicator - The Team
The team plays a vital role as a leading indicator of value the company creates for end users. As a startup, the team typically uses an intuitive style of management; as time passes this style will fade in usefulness and need more formal forms of leadership and management. This is where aligning with the HR scorecard for team related metrics will help scale.
As a general rule, most companies, including startups, will have more than one scorecard linked together through cause and effect logic and cascading/alignment capabilities. All this is handled automatically by StratifyPro which is why you want to make sure you quickly move from excel type spreadsheets to a better automation tool like StratifyPro to keep your strategy manageable and accurate.
Value : StratifyPro Approach
We are looking at the number of paid subscriptions in both categories. We interact with our clients regularly through email and other means to ensure we understand their thought process. We take that feedback and modify our platform and process.
A leading indicator for paid subscription is “meaningful interactions.” In our case, these are “qualified pre-sale questions” and “live demo requests; but also quickly engage with existing users on training needs.
4. Retention KPIs
Research has found that brands who keep just 5% more customers see up to a 95% increase in profits. That means customer retention isn’t just a key priority, it’s one of the most impactful things your brand can do to ensure long-term success.
How good are you in retaining clients? You can quantify this with churn rate KPI. But to go deeper on this, you also need to understand the value to the customer that keeps the churn rate manageable. It may sound “large” for a startup, but it quickly becomes an important matter of survival - especially if you start seeing a churn rate exceeding 20% - and that could happen in a matter of weeks or months after going LIVE.
One of the first things you need to do is define how you currently bring value to your customers and then ask, what could you do better or differently to create more value. This is how you manage churn. This is NOT to be confused with customer lifetime value (next section), this is all about customer relationship value which measures whether your interaction with a customer moves the relationship forward (resulting in lower churn) or backward (resulting in higher churn).
So we measure customer relationship value we will use a scoring index (1-10) called “Customer Value Index”; to measure churn rate we will use a percentage measurement called “Customer Retention Rate”.
Customer Retention Rate (Churn Rate)
One of the most widely recognized metrics in this area — customer churn rate which is the percentage of customers who cancel their subscription in a given pre-defined period. This could be customers who have lapsed in use, so they are no longer starting sessions, or it could be customers who have uninstalled the application. The difference between which of these two options is used to define churn is determined by an app’s vertical and business goals. For example, customer churn rate, specifically, refers to the cohort of users who have stopped using the app’s products or services. This is particularly useful for apps that use a subscription model.
Why is Churn Rate Important?
If your churn rate is high, this could mean you’re spending a lot of money on user acquisition but not getting the maximum ROI from the user. By identifying what the issues are, you can improve user retention — and subsequently revenue - this is where CVI comes in (see later section).
How to Calculate Churn rate
To tailor a churn rate calculation to your app’s needs, first determine whether you will be measuring inactive users, users who have uninstalled the app, or users who have canceled a subscription. Then, choose your time frame. Do you need to measure annual churn rate, monthly churn rate, or another period?
In-app event tracking can help you see exactly where in the user lifecycle your users tend to churn, providing both an idea of which period will be most useful to measure and the exact places you might need to intervene to reduce churn.
Generally speaking churn rate is calculated by dividing the lost customers by total customers and multiplying the result by 100 - this gives you your percentage churn rate
There are many variations and variables to calculate customer churn, VNCDesigner does the calculations for you.
This is a basic customer churn rate tells the story of — how well the business is able to keep their customers. To quantify more such as - how well the business is able to expand revenue with their customers (i.e., “upsell”) and how efficiently the business is growing, requires incorporating various types of revenue into the equation. Again StratifyPro handles the equations.
Customer Value Index (CVI)
CVI is a type of composite measure that summarizes and rank-orders several specific variables to represent a general dimension. Essentially, an index is an accumulation of scores from a variety of individual items. The value of index is that it allows you to have a systematic and consistent way to make evaluations.
For our purposes, the general dimension is “customer value”. Consider incorporating these five individual variables into your formula for creating the index:
Total purchases over their lifetime (#)
Average purchase value ($)
Number of products/services purchased (#)
Referrals generated (#)
Overall length of time as a customer (#)
You can take a number of approaches to create your index for customer value using these five variables. The simplest approach is to create a means for “adding up” the values for each variable and then establishing an index score. This will require you to have a common way to “rate” each variable, for example we use 1-10, with 1 being a low score and 10 being a high score. For each of these, you would then create a multiplier based on the weight of each variable, for example, a 1-5 multiplier with 1 being a low ranking and five being higher ranking.
Once you have your “model” in place, you can evaluate each customer using the same approach. Those customers above the index will be higher value and those below the index lower value.
StratifyPro does all these calculations for you, so if you're a client of the StratifyPro platform - no need to worry about the math and calculations - we do it for you automatically and accurately.
Retention : StratifyPro Approach
We are tracking churn rate across different regions, business domains, and subscription types adjusting our onboarding process and development roadmap. We are tracking CVI as well to understand customer value so we know what's working and what not working causing higher and lower churn. For example, one of the findings was related to the interface complexity with our balanced scorecard spreadsheets; another was the need for more configurable dashboards and LIVE training. We knew these things from our CVI and Churn rate combined.
5. Economic Sustainability KPIs
Let’s face it — investors are betting on your startup’s ability to generate substantial returns. They want to see hard metrics that reduce risk and demonstrate market potential.
Startup economic sustainability KPIs like customer acquisition cost and burn rate allow investors to assess key questions that determine funding decisions.
In essence, startup economic sustainability KPIs let investors model your current trajectory and see if it leads to major profitability. They take your projections from abstract ideas to tangible, measurable insights.
You need to answer the most fundamental question - “Where are we trending long-term?”. That’s why mastery of metrics is so critical to securing startup funding. Here are some of the most crucial KPIs.
Burn rate (e.g., negative cash flow), cash flow
Burn rate is the rate at which your startup is spending cash each month. Essentially, it’s the rate of cash outflow.
Keeping burn rate reasonable is essential for startup survival. Fast burn rates quickly eat through capital — forcing constant fundraising and dilution.
Ideally, startups want to minimize burn rate as much as possible. Controlling burn rate extends runway and capital efficiency. It reduces risk for investors by keeping costs variable. Prioritize sustainable growth with disciplined spending.
VNCDesigner takes care of all these calculations for you and keeps them up to date and current!
CAC / LTV (Customer Acquisition Cost / Lifetime Value)
Customer Acquisition Cost (CAC) is a straightforward metric that tells both you and your stakeholders if your subscription business is viable. In the long term, you need to be spending less acquiring a typical customer than what you’re earning per user.
The tricky part of CAC is the actual calculation. Which costs should you include? Generally speaking, the CAC is calculated by dividing the total amount of cost spent on acquisition activity by the total number of customers acquired in a set period of time. Don't worry - VNC Designer handles all these calculations for you and keeps them current!
Lifetime Value (LTV) is one of the most important metrics for subscription-first businesses as one of the core tenets of the business model itself is delighting customers and getting them to stick around for the longest period of time possible — ideally forever!
In essence, the higher this number, the bigger value your product is perceived as having to your subscribers, and the more they’re happy to spend on your service. Whether you’re the first business to make a subscription-first model for an essential service (think toilet paper delivery) or you’re known for your hyper personalized, bespoke boxes (think clothing subscriptions), once your product is deeply embedded in a subscriber’s way of life, this number can only increase. Again, VNCDesigner handles all these calculations for you!
Revenue (MRR / ARR)
Monthly Recurring Revenue (MRR) is a useful snapshot metric for subscription businesses. Your monthly recurring revenue is the average revenue you earn per subscriber in a month, multiplied by the total number of subscribers. It shouldn’t include one-off revenues.
MRR is a one-step calculation if you have only one subscription plan. However, it’s possible that your business has multiple tiers. In this case, any plan longer or more expensive than a monthly plan needs to be adjusted accordingly. For a yearly plan, for example, you need to divide the revenue by 12. If you have custom plans, you’ll have to make additional adjustments. VNCDesigner handles all these calculations for you!
Annual Recurring Revenue (ARR) This is calculated in a similar way to MRR, but serves different needs. It’s useful for creating annual reports or long-term forecasting. Make sure you don’t include any free trials or other non-revenue generating promotions in this recurring revenue calculation, as it blurs the context of your final result. Once again, VNCDesigner ensures you follow the rules and performs these calculations for you.
Gross Margin (costs, profits)
To calculate your gross margin, you need to get two figures down first. The primary figure should be easy to find: it’s your sales revenue. There’s more moving parts to the second figure, which is your total costs. These consist of everything from the costs of paying your support team to your web hosting fees, your marketing spend, the cost of packaging or procuring samples for first-time customers, and more.
The reason that this isn’t the most important indicator for subscription-first businesses, while transactional businesses will often rely on it, is that it can be pushed up by reducing costs and focusing on boosting one-time sales. It is not only counterintuitive within the context of customer loyalty and customer retention, but provides very little information about either of these too.
StratifyPro once again saves you the time and performs all these calculations for you!
Economic Sustainability : StratifyPro Approach
We are profitable, so our main economic metric is annual recurring revenue (ARR). Similar to retention KPIs, we are looking at revenue related to certain geographic regions to focus our growth strategy.
Beside obvious economic sustainability, many successful startups also look at other pillars of sustainability that help to build products for sustainability-aware clients. Engage with our training and other articles to learn more.
Automation Software
Using automation software such as StratifyPro will help manage your strategy and keep it accurate and actionable. But we realize using automation software for the Strategy/KPIS implies some costs, so here is our advice:
If you are bootstrapping then you should be ok and survive with spreadsheet software like excel or google sheets for a while. Although you are better to start with Free access to StratifyPro because excel spreadsheets will get messy and inaccurate very quickly.
As you get into the need for organizing MVP and live Launch of your product, you should consider upgrading to StratifyPro Business. This makes it far easier to organize, create and execute KPI/strategy routines in your daily tasks and appreciate the automation and accuracy. In this case, StratifyPro is a great “out of the box” option and very easy to use.
Who Uses the Balanced Scorecard?
Let's start with defining what a Balanced Scorecard is …
The balanced scorecard (BSC) is a strategic planning and management system. Most well run organizations use BSCs to:
Communicate what they are trying to accomplish
Align the day-to-day work that everyone is doing with strategy
Prioritize projects, products, and services
Measure and monitor progress towards strategic targets
The name “balanced scorecard” comes from the idea of looking at strategic measures in addition to traditional financial measures to get a more “balanced” view of performance. The concept of a balanced scorecard has evolved beyond the simple use of perspectives and it is now a holistic system for managing strategy and at the heart of a platform like StratifyPro. A key benefit of using a disciplined framework is that it gives organizations a way to “connect the dots'' between the various components of strategic planning and management, meaning that there will be a visible connection between the projects and programs that people are working on, the measurements being used to track success (KPIs), the strategic objectives the organization is trying to accomplish, and the mission, vision, and strategy of the organization.
BSCs are used extensively in business and industry, government, and nonprofit organizations worldwide. More than half of major companies in the US, Europe, and Asia are using the BSC, with use growing in those areas as well as in the Middle East and Africa. Companies such as Apple, UPS, Microsoft, Citibank and more all use BSCs at the core of their strategy planning and execution. A recent global study by Bain & Co listed balanced scorecard fifth on its top ten most widely used management tools around the world. BSC has also been selected by the editors of Harvard Business Review as one of the most influential business ideas of the past 75 years.
Why Does a Startup Need a Balanced Scorecard?
This all sounds very good and a major asset for larger companies. But why might a startup need the Balanced Scorecard framework?
Overall, Startups can also take advantage of a Balance Scorecard by aligning day-to-day operations with a long-term mission, vision, goal, values, etc. From fortune 500 companies to well-established organizations, to Startups most of them use a Balanced Scorecard to plan their actions.
It’s just as important, if not more important, a Startup is able to measure and track KPIs in a BSC framework for a few reasons … here are just two:
Reason 1. Getting a Clear Understanding of the Strategy
A Balanced Scorecard puts on paper the strategy of the startup. Founders of a Startup need to be sure about their business model, expected financial outcomes, and how exactly the company is going to spend its venture capital or private funding. In basic terms, and detailed in this paper to a large degree, the BSC helps founders understand their strategy better and explain it to investors.
The Balanced Scorecard framework is about these four perspectives:
The expected financial results ( Financial perspective)
Customer value proposition ( Customer perspective)
Business processes that a company needs to have ( Internal perspective
Key learning and growth direction to focus on ( Learning and growth perspective)
Within each of the perspectives, we answer certain questions, and the answers are connected by cause-and-effect logic which focuses on execution and actions. In the case of a startup, these questions can be:
Finance. How do we monetize the value created for customers? Our goal: achieve economic sustainability.
Customers. What value do we create for the customers? What do our customers need? How do customers perceive the value that we create?
Internal. How do we create value for customers? How do we attract, engage, and get feedback from customers? What business processes do we need to create value? How do we retain customers?
Learning and growth. What knowledge/skill gaps do we need to fill in? What skills does our team need? Where does customer development need to be focused?
All this is aligned to your mission statement.
The bottom line is the BSC provides exactly what all startups need and that's clarity and ability to execute strategy:
Results : Customer Value & Financials
Needs: Business Systems & Expertise
Measurements of success: Total cost to execute and KPIs to track execution
Reason 2. Pitching Idea to the Investors & Stakeholders
Having a one-page picture of the strategy allows companies to easily communicate strategy internally and externally. We have known for a long time that a picture is worth a thousand words. This ‘plan on a page’ facilitates the understanding of the strategy and helps to engage staff and external stakeholders in the delivery and review of the strategy. The thing to remember is that it is difficult for people to help execute a strategy which they don’t fully understand.
For Startups, by having a strategy map - a one page view, along with the details of various BSC spreadsheets, you send to your potential investors a simple message:
“We did our homework in terms of strategy… Here is how we plan on executing and measuring it…”
It's an easy and efficient way to communicate your strategy to stakeholders and others.
That’s similar to what non-profit organizations do when they are looking for financial donors. That’s what top managers do when they pitch their ideas internally to the board members.
Will it Work for Daily Strategy Management?
For Startups, without a doubt, a BSC will contribute to daily processes and overall successes. Research has shown that organizations that use a Balanced Scorecard approach tend to outperform organizations without a formal approach to strategic performance management and this most definitely includes Startups that are past the idea phase.
On a daily and regular basis, as things change, the Balanced Scorecard helps Startups map their projects and initiatives to the different strategic objectives, which in turn ensures that the projects and initiatives are tightly focused on delivering the most strategic objectives.
The Balanced Scorecard approach helps organizations design key performance indicators for their various strategic objectives. This ensures that companies are measuring what actually matters. Research shows that companies with a BSC approach tend to report higher quality management information and better decision-making.
Example of a Strategy Map for a Startup
The following is an example of a template you can download from StratifyPro to kick start your strategy planning and execution program for your startup.
The strategy map contains the KPIs we discussed throughout this article. It also provides guidance as to goals and perspectives and where the KPIs best map. The strategy map further provides cause and effect logic between goals/KPIs as well as where the strategy needs to cascade to other scorecards that will need to be generated. These Scorecards include one for HR - but there will also be other scorecards such as cyber security.
All these templates are available from StratifyPro as well as more details on specific KPIs for startups. Register today for StratifyPro - its Free and we don't as you for your credit card!
Conclusion and Next Steps
As a founder of a startup I encourage you to document your business strategy as soon as you possibly can, principally because you are unlikely to have a clear way to achieve your business outcomes in your own mind if you can’t write it down on a piece of paper. Once you begin to document your objectives, I suspect you will soon realize there are unresolved questions, vague priorities, and aspirational plans that don’t quite fit.
At the very least, writing up your business strategy will bring the clarity you need to articulate and share your vision with others.
Moreover, the activity of communicating your strategy on a single page will help you to expose cause and effect relationships that exist between the objectives you surface.
Get Moving with the Balanced scorecard - it DOES Matter!
I suggest you get on this right away:
Develop pain points - what are the right questions to ask?
Define a few necessary KPIs - use our template and the KPI suggestions right here in this document
Use StratifyPro - get the free version or download our populated scorecard right from our site - all Free!
Next Steps
Get the templates : Register for our free plan at StratifyProfor immediate access to all our templates including the one for Startups highlighted in this paper.
Become an Expert : As a Free StratifyPro remember, you have access to online videos and LIVE training sessions where you learn how to create strategy maps and use the balanced scorecard framework - and more
Let VNCDesigner do the Heavy Lifting : See how using StratifyPro to plan and execute your scorecards and strategy will make your life easier - and best of all will make you look like a hero to all your stakeholders.and customers.
Click below to download the entire document - enjoy, this is FREE!