5 Common Mistakes Startups Make With Data and How to Avoid Them

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Most startups, especially companies making apps, software as a service, and other online businesses, are swimming in data. And while it’s great to have so much information available right at your fingertips it can be detrimental if not utilized correctly.

The key is determining what to track and what’s just simply not important. It’s tempting to fall into the trap of tracking metrics that don’t really matter all that much and don’t truly tell you how your business is doing. Especially when those metrics look really good.

Below I’ve listed the five things you really don’t want to do when you start a new business and ideally at any time in the life of your business. 

1. Tracking vanity metrics

Vanity metrics are things that you can measure but don’t speak to the success of your business. They can easily be manipulated or overblown and lack a direct correlation to your business goals.

Good examples of this are metrics like search impressions on your website or number of Facebook followers. Neither of these metrics tell you if you are building a solid business. 

Sure, people are showing up. But are they just clicking once and leaving? Are they buying something from you, joining your mailing list, or leaving insightful comments? If a metric just looks good on paper but doesn’t tell you if your business is doing well, you can skip it.

How to use vanity metrics correctly

While you don’t want to be looking at page views, likes, and comments to determine financial success, you can still get use out of them as non-transactional data. This means that these metrics serve as a benchmark for brand awareness and customer engagement. They let you identify what brings customers to your site, what they interact with, and overall what resonates. 

You can then use this data to curate and develop content that your customers actually want to engage with. If you run a blog, have multiple product pages or even if you run digital ads, this can help you optimize your time and investment. And down the line, you can set up triggers (like calls to action, multiple page views, filling out a form) to better track if your efforts lead to actual financial results.

2. Using poorly defined metrics

You want the metrics you track to support your goals. And like goals, data is only as good as its definition, and any metric that is not defined well won’t help you make good decisions.

For example, an online community might say that it has 30,000 “active” users. But what does “active” really mean? It could mean that a user just showed up once and then left. That’s hardly what I would call “active.”

Perhaps a better definition would be a user who showed up, clicked on four pages, and signed up for an email list. Whatever metric you’re looking at, make sure you define it well so that when you try to improve it, you can come up with good ideas for making it better.

How to define metrics

Think of the data that you collect as supporting metrics for your business goals. These are key performance indicators (KPI) that measure how successfully you and your team are performing. So when you go to define these metrics, you’ll want to do so from the perspective of “what will help me understand the state of my goals?”

This means that you’ll want to cut out any metrics that don’t influence the achievement of your business goals. You can still track other data, but spend more of your time on what actually affects your business. 

Additionally, be sure that you also set a benchmark for success based on past results or market trends. This gives you something to compare against and helps you understand if your goals are realistic or not. Don’t be afraid to adjust or change what metrics you track as you go, just be sure you do so strategically with the intent of better understanding your performance.

3. Focusing too much on the short term

We’ve all been there; sales are down for one day and we scramble like the roof is on fire to try and figure out what is going on.

Unfortunately, more often than not, it’s just a random aberration in how people behave from one day to the next. In any business, you can expect a few days a month to be better or worse than “normal,” and you can quickly fall down the rabbit hole trying to figure out what happened.

Instead, recognize when these random events happen and wait a day or two to see if you have an actual pattern before you ring the alarm bell. You’ll save yourself and your team a lot of time and energy focusing on real problems and not just random swings in the data.

4. Not taking action

While it’s certainly common to find entrepreneurs that aren’t tracking much (if any) data about their business, it’s also common to see people tracking tons of data. The mistake that happens to people who track lots of data is often forgetting to take action on the data they’re collecting. They spend all their time and effort collecting and collating data and don’t have time left for analysis.

Everything that you measure should help you track progress toward your goals and help you make decisions. If a metric changes significantly and there’s no action to take, then perhaps you shouldn’t track that metric. Don’t get so wrapped up in data collection that you forget to use it to actually steer the ship.

How to avoid complacency in data collection

If you find yourself struggling to take action on trends you’re seeing, the best thing you can do is set up regular review sessions. It establishes a timeline for you and your team to actively review and make decisions. These can be every week, once a month, and even quarterly, it just depends on your business.

5. Recording data just to record it

Just because you can measure something, should you?

While it’s tempting to track as many metrics as you can think of, you want to make sure that your key numbers are easy to find without being obscured by a bunch of data that just doesn’t matter.

Focus on tracking and watching the key metrics that drive your business—the metrics that determine if you’re on track to meet your goals. Dump the stuff that just isn’t useful or actionable.

How to simplify your data reporting

One simple way to cut through the massive amount of data you’re collecting is to set up automated reporting. This can be done through Google Analytics, Search Console, Data Studio, and a number of other SEO and analytics tools. 

Doing so eliminates the temptation to continuously record everything. Instead, you get a streamlined view of the metrics that matter to your business. The nonessential data will still be automatically recorded and available to you, but it won’t interfere with what you’ve established as core metrics.

Avoid mistakes by falling back on your business goals

As a startup, you’re bound to make mistakes. Even with effective planning and understanding the pitfalls you can run into when collecting data, it’s incredibly easy to lose track of what’s important. But there’s a simple way to bring yourself back from those mistakes and that’s by revisiting your business goals.

Think of your goals as your north star when it comes to planning and data collection. They remind you of what’s necessary for your business to succeed and can help you parse through the sea of information you’re collecting. By making regular performance checks and goal reviews a part of your weekly, monthly, and quarterly review schedule, you can avoid these common mistakes and keep your business on track.

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Noah Parsons
Noah Parsons
Noah is currently the COO at Palo Alto Software, makers of the online business plan app LivePlan.
Posted in Growth & Metrics

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