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Business KPI’s

So last night, just after I wrote my daily blog entry I’m browsing YouTube and one of my suggested videos to watch is an old episode of Dragon’s Den.

Judging by Peter Jones’ face it must have been an episode from at least 10 years ago 🙂

Needless to say that the lady asking for an investment into her business delivers an appalling pitch. But it goes from bad to worse.

She’s not only calling all Spaniards dishonest across the board, but she also refuses to answer basic questions about her revenue as she calls it irrelevant.

Clearly the pitcher, who’s apparently the ex-wife of Jeremy Clarkson, isn’t the most serious Entrepreneur ever on the show, but there’s an interesting lesson and it made me think…

Back in 2010 when I lived in London, I decided to move to Shoreditch – London’s tech hub that was still in it’s infancy and little known outside of London or the UK. However, any meet-up I’d go to in Shoreditch or the City would have similar characters turning up to:

“I’ve got this big idea, if you’re a coder I give you a few percentage of it. I don’t have money or any other skills. It’s going to be big.”

Since I’m a jack-of-all-trades I got plenty of people asking me for coding help. Luckily, I also understand the business side of things and was able to separate the serious offers from the BS’ers.

After some time the typical thing you would hear would be:

“I’ve raised £[ENTER ANY INSANE AMOUNT]. How much have you raised?”

At the time, the only stories that were featured by Techcrunch would be about how many hundreds of thousands or millions of dollars this or that new startup just raised.

After a short stint in Germany, where things were a bit more traditional and conservative, I moved to Vilnius, Lithuania. This time round people had two questions at meet-ups:

“How much money have you raised?”

…or….

“How big is your team? How many employees do you have?”

For some unknown reason I fell for this trap. I actually opened a physical office space that was about 5-7 times bigger than I needed at the time and I started hiring people without any deeper strategy behind it.

My company went from being profitable and budget-oriented to needing my personal cash injections on a monthly basis.

And for what?

Now I could tell people I have XX employees?

I grew the team size by XX% month-over-month?

We’ve got a massive office in one of the best parts of town?

To use the words of the lady seeking investment on Dragon’s Den: that’s IRRELEVANT.

The size of your team is as irrelevant as the amount of money you’ve raised or all the ideas you’ve had but never executed on.

What’s not irrelevant was the monthly cash injections I had to make from my personal savings into the company.

What’s not irrelevant was the slowly growing revenue on the one side and the exploding expenses on the other side.

What’s not irrelevant was the lack of profits.

If you look at your business right now, there are only a few relevant numbers in my opinion. Everything else is more or less irrelevant:

  1. PROFITCash is King after all!
  2. REVENUEIn some cases, like SaaS, potential buyers use multiples of your monthly recurring revenue (MRR) to value your business
  3. Owner Happiness/Health Especially if you’re bootstrapping your company and you’re the sole or majority owner you might want to put your happiness and (mental) health as one of the top priorities. There’s no point in all that wonga if you’re sick in the end.

That’s enough for today. I’ll share in another post some other crazy conversations and KPI’s I’ve over-heard in Vilnius and I’ll also share another day what made me close down my office in the end.

And here’s the YouTube clip:

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