Track your path to default alive
Startups start "default dead", and need to change something to become profitable and "default alive" before money runs out. To navigate this "path to default alive", they need to know where they are today, where they need to be, what they're doing, the change that will have, and how they're progressing.
There's a lot there, and we track all this for eesel in one place.
We think others will find this template handy too, so here's a quick guide on how to use it.
1. Lay out your milestones
List out all milestones that impact core metrics in some way. In practice, this should be most of what you do. I mean, if it's not impacting your metrics, why are you doing it?
You can split these milestones by activities like product, marketing and so on.
2. Record actuals and targets
List out your core metrics and their breakdowns. Actuals are the state of the world today. Targets are estimates of how you expect things to change. It's really important to capture things in a holistic way, and we've covered how to use growth accounting to do this before.
Activities you're doing should make metrics move, and that's highlighted in yellow. For example, you can see improvements we expect on launch of Feature X in May.
We hardcode these bumps as "Inputs". For example, you can see that we expect Feature X's launch to improve the New and Churn rate for Active users.
We're no expert on creating estimates, but a tactic we use is to isolate the impact of the activity with step by step reasoning. Walk through the steps for how many people will get exposed to the feature, how many will try it, how many will really engage, how many will continue using it, and so on.
For example, let's look at the impact of Feature X on Net Churn. Our research and intuition suggests that we expect for every 10 people currently leaving, 9 people will be exposed to the feature, 7 will try it, and we think 3 will be convinced to stay. This means that we expect a 30% improvement in Churn, and that brings it down from 15% to 10%.
There are other ways of doing this. This is a good read by Sequoia on top down or bottom up goal setting. Use whatever is most sensible for you, and seek to learn and improve on how you forecast with time.
3. Visualise actuals and targets
Take actuals and targets for core metrics, and plot them. You'll be able to see the path you are on today and the path you need to be on. From MAU to MRR to breakeven, you can do this for a few things and we suggest focusing on 2-3 charts for simplicity.
As eesel is currently "default dead", we like to call this target trajectory our "path to default alive".
4. Do check ins at a regular cadence
It's obvious that all this is only useful if you actually look at the numbers regularly. The hard part is getting in the habit of doing that.
We've found habit stacking to work well here. For eesel, we coupled metric checkins with planning. We already had a habit to plan our goals, and we just made checking into metrics a part of this habit.
We plan at a weekly level, where we look at a subset of weekly metrics. We plan at a monthly level, where alongside our goals, we look at our path to default alive. Metric checkins are a part of our planning template, and feed into what we're going to do next. Doing these regular check ins is what gives us an opportunity to learn and course correct.
5. Beware of the plan's naivety
The template we're sharing is very simple, and you need to apply your judgement. Be honest about the uncertainty attached, and don't forget that the map is not the territory. Don't believe that you can reasonably grow at a high compound growth rate for extended periods. Don't believe that you can meaningfully bump your metrics with the launch of a feature, right away (ah, if only).
Reality is of course nuanced. Feel free to capture these nuances as it makes sense, but remember that there's a trade off, and you don't want to make things too wieldy to digest.
Wrapping up
That's it! You've got a path, and now you just need to hit those targets. Easy, right? :)
Treat this template as a starting point. We're no expert on all this and we're still making things up as we go along. For example, we're still figuring out how to bring more focus with the plan (it's easy for there to be a lot to take in), and how to bring in cohort retention (which is of course key at an early stage).
Feel free to extend the template as it makes sense, and do let us know if you have ideas on how to improve it.
Some reads
A few reads were crucial to our understanding of all this and we are grateful for them.
- Christoph Janz's dashboard which is more revenue oriented
- David Skok's (timeless) take on SaaS metrics and his dashboard
- YC's talk on startup metrics and this growth calculator
Thanks to Jo Niec, Rahul Reddy, Louis Ryan, Helene Reydet for helping with our template and this post.