So many layoffs in the tech sector have driven a surge in new fintech ISVs, ISOs, and agents. The ease of entry into the payments industry, coupled with the immediate need of laid-off tech workers to put food on the table, has created a bustling landscape of new opportunities. Recent reports indicate that thousands of tech professionals in the U.S. have been laid off, adding to the urgency for these individuals to pivot into new roles and industries.
This surge got me thinking about the KPIs that new fintechs, ISVs, and ISOs should be able to track, and the importance of choosing the right metrics. In the rush to establish and grow these businesses, having the right KPIs is crucial. They act as the velocity gauge of your company, providing insights into how well you're performing and whether you're heading in the right direction.
The Steve Jobs Side Note
Remember when Steve Jobs introduced the iPhone? One memorable moment was when Jobs held up the Shazam app, which could identify any song just by listening to it. This app symbolized a leap in technological integration, where technology met practical everyday needs. If you were to hold up your payments company or ISO, what would be your "Shazam"? In other words, what would be the KPI or metric that instantly reveals whether your business is on track or off course?
Jobs understood that the future of technology was not just about integration but about anticipating and adapting to shifts in the market. Similarly, the right KPIs can help you identify whether your business is on the cutting edge or lagging behind. Your KPIs should act as your Shazam, providing immediate insight into your company's performance and direction.
Understanding KPIs: The Basics
Key Performance Indicators (KPIs) are measurable values that show how effectively a company is achieving its key business objectives. KPIs help businesses understand if they are on track and where they might need to adjust their strategy.
Types of KPIs: Aligning with Your Objectives
1. Financial KPIs:
- Revenue Growth: Measures the increase in revenue over time, reflecting business expansion.
- Profit Margin: Indicates the percentage of revenue remaining after expenses, crucial for assessing financial health.
- Customer Acquisition Cost (CAC): Tracks the cost associated with acquiring new customers, helping gauge marketing efficiency.
2. Operational KPIs:
- Operational Efficiency: Metrics like inventory turnover and production costs assess how well resources are utilized.
- Employee Productivity: Measures output per employee and overall engagement, crucial for optimizing workforce performance.
3. Customer KPIs:
- Customer Satisfaction (CSAT): Gauges how satisfied customers are with products or services, directly impacting retention and loyalty.
- Net Promoter Score (NPS): Indicates the likelihood of customers recommending your company, a key measure of brand strength.
4. Sales KPIs:
- Sales Conversion Rate: Tracks the percentage of leads converting into paying customers, reflecting sales effectiveness.
- Average Deal Size: Measures the average revenue per sale, useful for assessing sales performance.
Historical Metrics: Lessons from the Past
During the integration of telephony and digital technology, metrics such as text message volume and long-distance call minutes were crucial. Nokia and other handset manufacturers meticulously tracked these numbers to gauge their market position and adapt to changes. Similarly, today’s fintechs must choose KPIs that reflect both current performance and future potential.
Navigating Market Retreats and Strategic Shifts
As companies retreat from markets, lay off staff, and scramble for new strategies, it's crucial to stay connected and engaged in growth opportunities. Companies that focus solely on short-term metrics or fail to adapt their KPIs can become disconnected from their strategic goals.
In a fast-moving market, it’s essential to ensure that your KPIs are reflective of current performance and adaptable to changes. This helps avoid the pitfalls of being reactive rather than proactive, keeping your business aligned with its strategic vision.
Balancing Velocity and Responsibly Scaling
In the rush to enter new markets and capitalize on opportunities, companies often focus on speed. However, moving fast without proper controls can lead to missteps and costly mistakes. Load Balancing and Velocity Controls are crucial in ensuring that growth is sustainable and well-managed.
Load Balancing: This involves distributing work or resources evenly to prevent overloading any single component of your business. Proper load balancing helps avoid bottlenecks and maintain high performance.
Velocity Controls: These are mechanisms to monitor and regulate the speed of your business activities. They ensure that rapid expansion or scaling efforts align with your company’s capacity and long-term strategy.
Companies that neglect these controls may face significant problems, such as market misalignment, operational inefficiencies, and even layoffs. Misjudgments in this area can result in real humans losing jobs and contribute to a cycle of instability. Scaling responsibly is essential to ensure growth doesn’t come at the cost of your team’s well-being or the company’s strategic direction.
Picking the Right KPIs: A Field Guide
1. Align KPIs with Business Goals:
Ensure that KPIs are directly linked to your company’s strategic objectives. Whether focusing on growth, profitability, or customer satisfaction, choose metrics that provide actionable insights.
2. Regular Monitoring and Analysis:
KPIs should be monitored regularly to provide timely insights. Analyze trends and deviations to address potential issues before they escalate.
3. Adjust as Needed:
As your business evolves, so should your KPIs. Regularly review and adjust metrics to ensure they remain relevant and reflective of current goals and challenges.
4. Choose Partners with Complementary KPIs:
When selecting business partners, ensure their KPIs align with your objectives. A partner’s metrics should complement and support your own performance indicators.
5. Prioritize Staff Satisfaction:
Internal KPIs like staff satisfaction and engagement are crucial. Happy, motivated employees often provide the best insights into operational challenges and opportunities.
In the end, your KPI is your Shazam, or your Shazam is your KPI. People feel it, not just count it.