One of the most difficult tasks for any businesses owner to perform is benchmarking. Through this process, you compare your company against similar companies and industry averages to determine performance. This is difficult because most relevant information isn’t easily available. Publicly-traded companies are required by law to disclose certain information. Startups, small businesses and other privately-held businesses have no such requirement. Anecdotal information can be gained through networking and conducting some market research but that doesn’t provide a comprehensive overview nor does it facilitate the extraction of intelligence that can help your company’s performance.
A new benchmarking tool for business performance
“Startup Genome: A new framework for understanding why startups succeed” was recently published. The report was written by Max Marmer, Bjoern Lasse Hermann and Ron Berman with support from Chuck Eesley, Steve Blank and Fadi Bishara.
The purpose of the Startup Genome is to provide a framework for assessing the performance of startups by “measuring the thresholds and milestones of development that Internet startups move through.” The report analyzes data from over 650 startups, providing a rich source of data for benchmarking your company’s performance.
Even if your company is past its startup phase or operates in a sector entirely removed from technology, it’s worth taking a closer look at this report for several reasons:
- The Startup Genome was prepared by some very smart people (see the links above) with experience starting, building, selling and researching companies; many of the insights transcend the sector in which they operate.
- Angel investors, venture capitalists and other members of the investment community are reading the report and will set benchmarks for performance against which your company will have to compete.
- The framework for analysis they provide can be applied to your company to assist in developing a plan for sustainable growth.
Key learning from the Startup Genome
The Startup Genome is filled with some very interesting research. If you don’t have time to read it, here are some key take-aways:
Successful startups pass through similar stages of growth; skipping stages hurts performance
According to the findings in the Startup Genome, there are six discrete stages through which a successful startup passes. Each stage has specific milestones that should be accomplished. The stages are:
- Discovery stage to determine whether or not there exists an opportunity that is worth addressing.
- Validation stage to assess whether potential customers are willing to pay for what you are offering.
- Efficiency stage to refine the overall business model and streamline the customer acquisition process.
- Scale stage to grow the business aggressively.
- Profit maximization stage.
- Renewal stage.
Adapting your initial idea to the realities of the marketplace leads to tangible improvements in performance
According to the companies studied, startups that adapt their business model to the market in startup parlance raise 250 percent more capital, have 360 percent better growth and users are 52 percent less likely to scale prematurely.
Scaling prematurely is a serious problem. You may be scaling the wrong business model or may not have the resources to scale effectively. Getting this right is critical.
Entrepreneurial learning has a material impact on company performance
There are many ways to learn new things. For startup founders, the Startup Genome indicates that three types of learning are particularly effective for improving outcomes:
- Learning from best practices: companies that lacked successful mentors had a much higher incidence of failing to achieve key milestones.
- Learning from customers: companies that systematically tracked customer feedback and implemented processes to incorporate the learning from that feedback tended to achieve milestones at a higher rate.
- Companies led by entrepreneurs that failed to learn tended to scale their businesses prematurely or tended to change their business model too many times. Both of these behaviors hurt their ability to raise money and attract a talent.
The report is only 50 pages and is filled with rich data and graphs. It’s available for free, so I suggest taking an hour or two to read it.