How Should Startups Set Benchmarks

As a startup coach, I still remember the founder who once said that the goal was to “be a top-quartile startup.” This meant having a specific growth rate to reach or having a specific number of employees hired by the end of the quarter. In other words, this startup set quarterly benchmarks to reach that would put it among the best startups.

Needless to say, benchmarks were important to this startup, and I wholeheartedly agree. Most startups recognize the importance of benchmarks. Unfortunately, they don’t always know why they’re so important. Likewise, they don’t always know the best way to set up benchmarks.

Why are benchmarks so important for startups? There are two big reasons. First, they make a startup’s ambition level concrete. Second, they show a startup what is feasible and what is not. These two reasons for setting benchmarks are important to keep in mind when setting up a startup’s benchmarks.

Many founders make the mistake of pulling targets and benchmarks out of thin air. They know that they’re supposed to set benchmarks, so they do so for the sake of setting benchmarks. This might make a founder feel ambitious, but it doesn’t make them ambitious in a constructive - or even realistic - way.

Instead, the best way to set benchmarks is to follow the lead of the founder I mentioned in the beginning. Look at what the top-quartile startups have achieved and set comparable goals. For example, if this is your 15th quarter, and you know that the top startups achieve 50% growth in their 15th quarter, make that your benchmark. This gives you a target that is both ambitious and realistic. It will also give you an idea of whether or not you’re among the top-quartile startups.

Luckily, this information is easy to find. You can get it from investors, service providers, or even coaches and consultants like the Midstage Institute. Coaches are always willing to share what they’ve seen at other startups to show what’s feasible. By looking at what other startups have achieved, founders can see what’s possible. This is ultimately the best way to set benchmarks that are ambitious but possible rather than pulling targets out of thin air without any regard to whether they are achievable.

Roland Siebelink has been a coach and advisor for dozens of startups. He’s helped them to set benchmarks, find their breakthrough, and scale as quickly and efficiently as possible, including a few that have reached unicorn status. 

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