While traditional businesses track many KPIs across departments, the SmartUp methodology warns that this approach over-complicates decision-making in startups. Instead, SmartUp prioritizes a small number of critical KPIs that determine whether the business can survive and become viable.
Three core SmartUp KPIs are emphasized. The first is Time to Profitability, which measures how many months it takes for the company to reach positive cash flow, where income exceeds expenses. The second is Investment Needed, the total amount of capital required to keep the company alive until it becomes profitable. The third is Time to Payback Investment, which measures how many months it takes for the company to generate enough profit to return the initial capital invested.
A key efficiency KPI used in SmartUp is Sales per Employee. This metric is calculated by dividing total annual revenue by the number of employees and is used as a sanity check against over-hiring. Leading technology companies often generate hundreds of thousands or even millions of dollars per employee. For startups, a figure below $200,000 per employee signals inefficiency and excessive cash burn due to too much headcount.
Yonatan Stern strongly warns against using personal KPIs for employee bonus plans in startups. Because startup goals change frequently, a KPI defined early can quickly become irrelevant after a pivot. Tying compensation to such KPIs creates resistance to change and introduces rigidity. Instead, SmartUp recommends profit sharing, which aligns the entire team with the company’s overall success.
While internal KPIs should remain simple, SmartUp highlights the importance of KPIs in sales. In B2B environments, defining KPIs with customers helps quantify pain and value. Measuring performance before and after implementation allows startups to demonstrate ROI and shift discussions from price to value delivered.
