Starting your own business is an exciting and stressful time. In this article we’ll provide ways to lay the foundation for your business, what you need to think about, steps to take, and even how to be strategic and thoughtful around your model using OKRs (Objectives and Key Results). In fact, OKRs could be the game changer you need to get your business off the ground, headed in the right direction, and on the road to success.
How to start your own business using OKRs
Whether you worked for a large or small organization, or had another business entirely, it’s important to mentally prepare by asking yourself if you’re passionate about what you’re creating.
Starting with your Why and your Values ensures that the products you create, the success metrics you aspire to — and the tradeoffs you inevitably have to make along the way — have integrity.
Too few early-stage companies think critically about the starting ingredients needed to endure. One of the most important ones is your team. Your people are the difference between success and failure. Without a strong and aligned team, progress is limited.
By using an Objectives and Key Results framework you can simply, yet effectively communicate priorities and responsibilities to your team from the start. OKRs clearly outline a company’s top priorities and the metrics that need to be tracked to ensure success.
So, what are some common mistakes people make when starting a business?
Mistake #1: Failing to define a mission or strategy
Without a mission for what you want to achieve, it’s impossible to build out a strategy. So before you start assigning goals and metrics…
Define your purpose and mission
Consider companies you admire, then think about what you want your company to be known for. Define your top three-to-five core values. Finally, make sure everyone in the organization understands the purpose. Simpler and more earnest the better.
Create a business model / write a business plan
Where many people make a mistake is presuming these are one and the same. Your business model is a way to think about delivering value to customers. Your plan is how you’ll get there. All of this includes defining your core market, identifying and implementing your processes, outlining the resources you’ll need, and having a clear value proposition.
A North Star OKR can help bring the business plan to life
Can you describe what success would look like in one year? Craft an OKR that captures that. That’ll serve as your North Star. From there, work on setting 2-3 OKRs for the 90 days ahead. Consider how Pinterest uses long-term goals and aligns shorter term OKRs to them.
Mistake #2: Poor Product-Market Fit
If the market doesn’t want or need what you’re selling, all the North Stars and ambitious missions in the world can’t help. But how can you know that? And more importantly, when?
What problem are you solving for the customer?
In trying to build out Superhuman, founder and CEO Rahul Vohra, asked the question, “What if you could measure product/market fit?” He stumbled upon this framing from entrepreneur and start-up advisor Sean Ellis, “Ask your users how they’d feel if they could no longer use your product. The group that answers ‘very disappointed’ will unlock product/market fit.”
How will you know you’ve succeeded?
Ellis conducted a comprehensive customer development survey which revealed the magic number was 40%. Companies that struggled to find growth almost always had less than 40% of users respond “very disappointed,” whereas companies with strong traction almost always exceeded that threshold. So, Superhuman set an OKR to get this metric from their users. After analyzing the survey data, they found they were able to pivot their company from serving casual email users to super users, resulting in an additional $33 million investment and a higher valuation.
Defining an MVP (Minimum Valuable Product)
Not “viable” but “valuable”. Every start-up has one — from Dropbox and Amazon to Zappos and Airbnb — and usually the MVP is what allows you to get initial funding so you can test your product, improve it and then get more funding. So, what do you really need to know in order to prove your product and service is valuable? Getting clear about what is a ‘have to have’ vs. a ‘nice to have’ can protect you from overengineering or burning through resources before your business is stable.
How OKRs can help in the product-market fit phase
Google’s story of adopting OKRs has inspired countless start-ups to do the same. Most start-ups don’t have a lot of data, but even so, Sweat Equity Ventures partner George Babu says, “OKRs are one way to talk about the value you’re going to deliver and what ‘good’ looks like.”
For Buffer, undergoing rapid growth created the need for more structure and accountability. They implemented OKRs to help them stay on the same page. According to Nicole Miller, Director of People at Buffer, what they found most helpful was “the idea that every time you sit down to do a task, you can look at (the) list and make sure what you’re about to work on is in line with the objectives… to take us the furthest.”
Finding your market
Regardless of whether your market will be niche or broad, you need to understand what motivates them to purchase your product. Many companies conduct research to learn who their products resonate with the most. You have to talk to your customers to truly learn what they desire and if what you’re selling fulfills it. It’s as direct as making a site visit, phone call, or sending an email.
Mistake #3: No Business Roadmap
Without a roadmap you’re certain to get lost. And if you don’t establish benchmarks for success, you won’t have anything to track or adjust along the way. Here’s where OKRs can make all the difference.
Turn your strategy into Committed and Aspirational OKRs
Strategy isn’t just a to-do list. That’s why OKRs can play an important role in defining it. There are three types of OKRs: committed, aspirational and learning. A committed OKR is an ambitious goal that a team must achieve by the end of the cycle. A committed goal stretches the team, but is realistic to achieve. An aspirational OKR is a goal that sets the bar for success further out than a committed OKR. When they set such a high bar as to be seemingly impossible, they’re called 10x goals or “moonshots”.
When it comes to strategy, Patti Stonesifer, former CEO of the Bill and Melinda Gates Foundation, talks about committed and aspirational OKRs in this way: “Until you set a really big goal you can’t find out which lever or a mix of levers is most important.” Once they decided their objective, they could be more practical with key results. Those key results helped to align their everyday activities, and over time they kept moving them to be even more ambitious against that really big goal.
If there are too many unknowns to set a committed or aspirational OKR, consider using a learning OKR instead. Rather than setting a goal around what you are striving to accomplish, a learning OKR frames it around what you are trying to learn. Create and implement a mix of these as you chart your business course.
Tracking progress with OKRs
Lots of people and companies set goals, but many don’t make them measurable. This setting and practice is what makes the OKR process unique: it informs the conversations for meeting a goal to clearly articulate what success looks like and encourage the continuous exchange of knowledge and ideas about how to get there.
Mistake #4: No system for goals and priorities
And finally, as you build out your business, create a cadence to talk about your goals and priorities. In terms of when to implement OKRs as you start your own business, we recommend you undertake this step as soon as your team grows too big to sit around the same table. In other words, OKRs are an incredible tool to help you stay aligned as the team grows.
How many North Star OKRs should a new business have?
One. You should have one North Star OKR. This is the main thing, the item you focus on and always come back to. With that one objective, you have three to five (ideally three) key results that you can use to measure against the objective. The more you have the more it becomes messier and then it’s likely not an objective, it might be a KPI. But that’s a story for another day.
Tracking and Grading your effort with OKRs
The OKR system has built-in check-ins to help you track how far you’re getting towards accomplishing your goal. Grading OKRs is an opportunity to reflect on what you’ve accomplished and what needs to be done differently the next time. We like to think of OKRs as a habit that’s just as important as brushing your teeth. You do it daily, not just when you’re visiting the dentist. Similarly, with OKRs, don’t wait until year-end to assess; if you’re off-track you can make plans to hammer out a game plan to get the KR back on track. And while OKRs don’t require daily tracking, regular check-ups — preferably weekly — are essential to prevent slippage.
Want to learn more about using OKRs to start your business? Take our OKR 101 course or sign up for our Audacious newsletter.