Every entrepreneur has their own big dream when they start their business. Either they want their business to be a unicorn (business valuation’s reach more than USD 1 billion) or a Phoenix (a business that can survive for hundred years). Therefore, entrepreneurs have difficulties in breaking down their big dream into certain concrete-measurable targets.
Hanging our big dream to be a source of our motivation sometimes is not enough. We can lose our confidence when we see the gap between the end goal and the current reality. Moreover, it can damage our team morale and soon they will start looking for other prospective places.
We need particular successful criteria to be our measurement tools. One of the approaches that I recommend is making Minimum Success Criteria. I found this idea from a book entitled “Scaling Lean” by Ash Maurya.
Minimum Success Criteria is the smallest outcome that would deem the project to a success for you X years from now. Usually, we use a limited time box not more than 5 years. Three years is the sweet spot. The outcome can be anything, but Ash recommends to use revenue as your short term target. The revenue will help you determine profit and business valuation easily.
After deciding what is our minimum success criteria we have to break down several steps to achieve it. If we put IDR 1 billion revenue this year as our minimum success criteria to gain, we have to plan what the progresses are that we have to achieve to reach that number. For example, in order to reach IDR 1 billion revenue in a year by selling the IDR 1 million product means that we have to sell 1,000 products a year.
Furthermore, we can break it more into some particular short time targets. If we know that the conversion rate from our store visitor is around 5% to be a buyer, then we have to invite 20.000 visitors to our store in a year. It means we need around 55 visitors per day to enter our store to make sure we can achieve the revenue goal. From this condition we can identify whether our customer segment is already large enough to power 20.000 visitors a year or not. We also can identify that our marketing channels are powerful enough to drive visitors to our store.
Setting up minimum success criteria will help us to know the strategy to use in achieving all of those targets. By the time we decide to increase the price of the product to IDR 1,5 million, we only have to sell less than 700 products a year. It means we need only 13.300 visits a year or 35 visits a day. We can also set a strategy to improve our conversion rate by using some discounts. By increasing our conversion rate to 10%, it means we need only 6.600 visitors a year or 18 visitors a day.
|price/product||conversion rate||visitor needed|
|IDR 1 million||5%||20.000 visitors/ year|
|IDR 1,5 million||5%||13.300 visitors / year|
|IDR 1,5 million||10%||6.600 visitors/year|
Targeting minimum success criteria can be a checkpoint for us to assess our progress while keeping our long term goal on our side. It will give us a map to force us to keep on the track to our finish line.
It is okay if many people look down on us when we are struggling with our minimum success criteria. Even in the early day’s Google got turned down by Yahoo after trying to get themselves sold to Yahoo for USD 1 million. Google’s traction was small that day, but they prove that they are giant today. We have to keep outreach every minimum success criteria until we see our business become stronger and keep getting closer to our long term goal.