This is a transcript of episode 77 of the Let’s Get Data-Driven Podcast
I’m Lanie Lamarre and one of my favorite TV shows is Friday Night Lights. I finally talked my husband into rewatching the series with me and we’re living our best lives in Dillon, Texas with Coach and Tami Taylor and the Riggins brothers and the Collette sisters and the whole thing. I forgot how many great take-away lines there were in that series and there are a few quotes that have made their way into our regular rotation in my household. One of them is from the last season where Coach tells his players that “success is not a goal; it’s a by-product” and I’m telling you this because that’s what today’s episode is all about.
It’s planning and forecasting season, boss! That’s the theme we’re rolling with in the Membership To Get Data-Driven this month and it’s a theme I’m bringing to the podcast today because some of you are setting Goals when you’d do better setting Key Performance Indicators (or what the cool kids like us call KPIs). The terms are used interchangeably and this is a mistake so let’s talk about what these two very different concepts represent.
Your GOALS represent an outcome or result that you hope to achieve whereas your KPIs are the sort of check-in points that measure where you are in relation to that goal.
Good to know – end of episode, right? Not so fast, young bucky. There’s plenty more to talk about here.
That Coach Taylor quote I opened with – the one about success being a by-product of the work and not the goal – it illustrates perfectly the difference between key performance indicators and goals because one is the work that is designed to keep you on track and the other is inspires you to stay on track in the first place.
Because you can set a goal to double your revenue and make $500K next year, and then you can spend more than you make on ads in order to hit that goal… but that’s probably not how you meant for things to go down, right? I mean, you hit your goal but it’s not exactly what you would categorize as a “success”, right?
Setting $500K in revenue as your KPI isn’t a metric that’s going to cut it when it comes to achieving your goals and seeing success. What’s more is that your goals will seldom be represented by one single metric, and it is the combination of data points that will create the full picture of where you are on your path to achieving your goals.
Let’s stick with this “double my revenue” goal because you know I love an example and this one is a good and timely one.
The assumption I would make – and let’s be clear that I am making mad assumptions here but you’re the boss, apple sauce, and that means you’re in a position to skip the assumptions and look at your own individual case and your own unique numbers – but I would assume that when you set a goal like “double my revenue”, you mean to stay as profitable as you currently are in the process.
This means that on top of revenue, we need to keep an eye on profit margins. We also need to increase our sales, and as such, we need to figure out what we are focusing on to increase our visibility. Are we relying on ads? If so, we’ll have to integrate some paid ad metrics into our KPIs. Are we relying on joint ventures? If so, we’ll have to integrate some affiliate marketing metrics into our KPIs. Are we relying on speaking engagements or social media or some other form of visibility that will enable us to get in front of enough people that will double our sales and keep us profitable? If so, we’ll have to integrate whatever those related metrics are into our KPIs.
Once you identify your KPIs, they are then assigned to someone who has to account for them. After all, it’s in the title that these are performance metrics and as such, it becomes that person’s responsibility to account for their performance in relation to that metric, which serves to fulfill the bigger goal.
What’s more is that one person should typically account for 2-3 KPIs but never, ever more than 5 KPIs. This means that if you’re a Team Of One, and you’re having to account for your ad campaigns and your social media growth on 3 different platforms and sourcing speaking opportunities and-and-and, it’s too much for one person to account for. You either need to bring on a team member or outsource some of that to an agency, or you need to scale your goal back.
Because I know this isn’t what gets marketed to you, but doubling your revenue is not a realistic goal for most small businesses. Especially not if your intent is to stay profitable. Typically, doubling your revenue will require a significant up-front investment of new resources that will eat into your profitability, with the intent of having it pay-off in the long-term. Does that mean you hire and outsource #allthethings? Nah, because as we’ve established, you’re the boss, and that means you have to make sure all the people serving your business are meeting their KPIs, or you have to hire someone who will account for it.
There’s a lot of talk about scaling your business, next-leveling or up-leveling your best results, and you totally can – but you have to acknowledge how this is going to impact your bottom line.
Let’s stick with this example of doubling your revenue. To do this, it is reasonable to expect that you would need to double your visibility. What’s the best way for you to do that? You’ll want to look at how your sales are currently being made: what traffic source is your most lucrative, and what percentage of your overall sales does this currently represent?
Let’s say 30% of your sales come from affiliate sales, meaning you bring in almost 1/3 of your sales from people who vouch for you and your product. Awesome! Next you’ll want to look at your affiliate metrics to see 1) the Number of Top Affiliate and their Total Sales; and 2) the Percentage of active affiliates. Because to double the number of affiliate sales you make, it isn’t enough to look at how many affiliates you currently have but instead, you want to look at how many active, performing affiliates you have. It’s also a good idea to study your top performers to see what they have in common and try to create a sort of avatar for your ideal affiliates to sign up. Are they former students? What types of offers do they sell? How frequently do they sign people up (meaning, is it through intentional promotional pushes that they’re making sales for you or is it more casual one-off, word-of-mouth bragging about you type of scenarios?)
Is this a lot of work? I’m going to say no. Because this is about getting intentional about understanding what is currently working – and working well! – for you. These are deep insights you have access to parlaying into better results if you’re willing to take the time to step back and assess them.
The reason I say that I don’t believe this is a lot of work is because I know how flipping hard it is to put a strategy in place and see it through and THAT IS a lot of work. Throwing spaghetti at the wall in hopes of reaching a goal without a whole lot of feedback about your performance is A LOT of work and time and energy and resources. Spending time looking at how that went well so you can use that information to your advantage and set KPIs that reflect the growth you’ve already accomplished will take some time… but it’s nowhere near as resource-consuming as trying to do #allthethings without a compass to tell you if you’re on track to seeing your goals through.
And look, I’ve already hinted at it, but doubling your revenue is some idealistic type goal-setting. It’s possible – of course it’s possible – but according to Indeed, a 5% business growth is considered healthy and Entrepreneur.com states that 20% business growth is considered outstanding. And this doesn’t account for – and hey! I dunno if you heard but of course you have because it’s all any of the media seems to talk about right now – but there’s a recession in the making and these growth rates doesn’t even account for that.
But you go to the bank with a business that shows 10% growth year after year, everyone agrees that you have an impressive growth trend to show for your efforts. “Double” isn’t sustainable, unless you really are focused on growth over profit, but that is a choice that will become evident for you to make when start setting your KPIs.
Because of course, you’ll see that doubling revenue will require you to onboard more resources to expand your reach, and you should expect that to eat into your profitability. The KPIs you establish will help you determine that and if you’re struggling to figure out what those are for you, I encourage you to join the Membership To Get Data-Driven because the theme in the membership for December is Planning and Forecasting, and this month only, I’m featuring a calculator to help you take the guesswork out of figuring all of this out and it’s available to members only.
And I’m not telling you not to think big – go ahead and think as big as you want – but what I am saying is that it is in knowing what it takes to get there and being accountable to the steps that have to happen that you will actually achieve your big lofty goals (and your small ones, too.) For instance, I don’t want a million-dollar business and it’s not because I don’t want the million dollars but it’s because I know what would be necessary for me to achieve that right now, based on what I’m working with, and I’m not willing or prepared to do those things at this point. Will that change? It probably will and because I’m the boss, I get to call those shots when I’m good, ready and committed to seeing those changes through.
Which is really all that planning and forecasting is! It’s not about filling in vision boards of all the stuff you want – although that can be fun, too – but it’s about actually about identifying what needs to happen for that vision to align to your reality, and making sure you’re seeing all those steps through.
Talk soon – Baiiiieeee!