Magic #’s

The business world is so complicated.  #’s are everywhere…

  • In social, it’s critical to understand your DAUs, WAUs, MAUs & their corresponding ratios to assess engagement
  • In SaaS, churn is one of the critical metrics
  • And so on & so forth – as the above are just the tip of the iceberg in regard to #’s

And then all of these #’s eventually have to translate to value across your financial statements, which are the ultimate determinants of what your real valuation is.

While passion has to be the driver of your process throughout company-building, you are a foolish manager if you don’t also have the ability to “put on your CEO cap” & view your business through the lens of building actual monetary value.

Great businesses catalyze from passion, but in order to achieve sustainability, must ultimately at the end of the day have the metrics that translate into $.

Here’s the rub though:  if you’re an early stage company, then becoming overwhelmed by ALL the #’s can do you more harm than good.  An early stage company that is spending too much valuable “time capital” researching public company comps & their corresponding trended P&L’s is probably not optimizing.

That’s why I think that it’s best to condense all a company’s #’s into an “order of operations” of priority, so that your focus is on the #’s that will “level you up” for the next 12 – 24 months.  Then adjust your “priority #’s” for the next set of milestones (or throughout as more information becomes available).

You need quantifiable #’s to assess your progress, as well as guide you where you need to make adjustments throughout the journey.

But there are only so many hours in the day & the human brain can only concentrate on so much before its focus is stratified across too many things in order to “execute” progress.

The above was a precursor to the point of this post which is:  I believe all companies should pick a handful of #’s as objectives to focus on, have managers communicate these #’s broadly, & with an “internally public narrative” continuously hammer home the importance of achieving them across all departments.

I call these #’s the “magic #’s” because they are the critical metrics that will “level up” the company in regard to its medium term goals.

To the above end, I will use the “magic #’s” of the internet marketplace that I am building now by way of example.  We are early stage & our magic #’s are: GMV, take rate, & buyer-to-seller ratio.

At scale, there is no question that for a marketplace, GMV & take rate are the most important.  But at our stage, it’s the last of those 3 that we are truly focused on because it relates to the daily executable process that we are focusing on right now & how it relates to our medium term goals.

The buyer-to-seller ratio is important because we need to discover the # of sellers we need to onboard in order to have sufficient liquidity to start catalyzing the “buy side” & then we need to increase both the “sell side” & the “buy side” simultaneously.

As we move across our lifeline, we then want a repeatable & highly local go-to-market strategy so we can scale across other cities in the U.S. & eventually globally.

But the point of this post is that it connects a bunch of different concepts as expressed by a handful of #’s:

  • You need to have an ultimate vision of where you see this business 7-10 years down the line & that vision has to include some practicalities, such as how you see the business ultimately monetizing or further monetizing
  • But the above is the end-game & you have to be focused on “daily/weekly/monthly victories” in order to inspire a team to get to that ultimate end-game
  • Metrics are your guides to getting there but you can’t focus on all metrics at once, nor can you as a manager communicate broadly within an organization to people with different skill sets the commandment to focus on ALL metrics at once
  • So you need to prioritize & focus on the “metrics that matter most for the medium term” & then communicate those broadly within the organization, as well as update everyone consistently on the company’s progress or lack thereof toward them

Also, it’s important to celebrate the incremental milestones on your way to building sustainable company value.  In this regard, you cannot be “binary”

  • “We’re on the journey” (a.k.a. no reason to celebrate yet)
  • And ultimately “we got there/did it” (a.k.a. aha, only now do we celebrate).

No.  Process-oriented success as judged by quantifiable measurements is just as crucial to company morale as to investor confidence.

Your magic #’s are a great way to both make sure you have metrics to evaluate company progress & to remind the team that when you hit them, you should all take a moment to reflect on the accomplishment.

What are your company’s magic #’s?

 

 

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Magic #’s