Analytics is about tracking the metrics that are critical to your business. Usually, those metrics matter because they relate to your business model—where money comes from, how much things cost, how many customers you have, and the effectiveness of your customer acquisition strategies.
In a startup, you don’t always know your key business metrics, because you’re not entirely sure what business you’re in. You’re frequently changing the activity you analyze. You’re still trying to find the right product, or the right target audience. In a startup, the purpose of analytics is to find your way to the right product and market before the money runs out.
Here are some rules of thumb for what makes a good metric—a number that will drive the changes you’re looking for.
A good metric is comparative. Being able to compare a metric to other time periods, groups of users, or competitors, helps you understand which way things are moving. Increased conversion from last week is more meaningful than “2% conversion.”
A good metric is understandable. Otherwise, people won’t remember it and discuss it, and it’ll be much harder to turn a change in the data into a change in the culture.
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. You need some, too.
There are several reasons ratios tend to be the best metrics:
Ratios are easier ...