I know metrics are crucial
to measuring and running a business. I got some books on entrepreneurship and
business and found a set of common metrics startups and business used to
measure their performance. I chose eight and added some more to capture a
deeper understanding of particular aspects of my business. I then read about
linking people’s performance to the metrics and using this to set targets for
When I chose metrics, I didn’t
pay any attention to their interrelationships. I quickly learned I had made a
mistake by ignoring these. One of the key metrics was a 10% increase in new
customers. Another was a 10% reduction in the investment in existing customers.
I increased staff bonuses for each new customer they got. At the end of the
first quarter we saw a 35% increase in new business but we lost 5% of our existing
customers and only 15% of existing customers used our services more than once.
At the end of the next
quarter the we saw another large increase in new consumers but a even bigger
churn for existing customers and less than 10% using our services more than once.
I brought this to the team and they saw no problems, they were following the
metrics-based incentive program and happy with their bonuses.