Last week in San Francisco, Amazon held their AWS Startup Day 2018 event for entrepreneurs and startup founders. It was an all day event with keynote speakers, a VC panel, and an afternoon of business and technical talks. The keynote speaker, Gina Bianchini, gave a very insightful talk and also had a great hook for a title — “The One Metric That Matters (and other Things You Should Know About Building Startups)”
Spoiler Alert: The one metric that matters: Revenue
It’s a metric that everyone working at a startup intuitively understands and agrees with. However, it never seems to get the full attention that it deserves. The early days of a startup are hectic, with the team running around doing customer development, building a new product, developing sales and marketing pipelines, or any of the million other tasks involved in building a company.
It can be easy to lose sight of the one metric that matters. During the keynote talk, the discussion on revenue happens during the following slide:
Source: The One Metric That Matters
What’s interesting is that three out the seven points are directly related to pricing and revenue:
What will they pay for? And how much?
As described in Monetizing Innovation, it is important to establish your business case using customer willingness-to-pay data. Search for the links between price, value, volume, and cost. Determine the product features that your customers are deriving the most value from and charge appropriately for the value you are providing.
If you do not have price-market fit, then you are either operating at a loss (which is not sustainable for growth) or are leaving too much on the table.
Measure early and often. Course correct deliberately.
Most people will read this and interpret it through the lens of product metrics and analytics: Which feature is most popular? Least popular?
If your background is in sales or growth, it might be interpreted through the lens of customer retention: Where is engagement happening? What is causing churn? Where are we losing people in our funnel?
At RevOps, we view this question through the lens of pricing: Are we charging too much? Are we charging too little? Are we offering the best service and value for customers? How close are we to price-market fit?
In the same way that a product or growth manager measures key metrics and reacts to signals (both positive and negative), businesses should be running experiments, measuring key metrics, and then bundling product features such that they maximize value for the customer and earn revenue for the company.
There is only one metric that matters — to anyone — REVENUE.
Save the best for last. Revenue is important, not only because it is vital to a business, but because it serves as a key indicator of the value your customers derive from your products and services. From that perspective, it really is the one metric that matters.
Thanks to Adam Ballai.
Originally posted by John Solis on May 1st on Medium.