The First KPI of Your Business
You’ve probably heard the term KPI before, which stands for “key performance indicator.” In my experience, your early KPIs are simple: you’re forecasting increases in sales, and implementing internal mechanisms like additional hires, or automating a support pipeline. They’re straightforward goals to set, and relatively straightforward to accomplish.
Out of the thousands of different measurement tools you can use to grow your company, there is one I consistently recommend but rarely see in widespread use: measuring a decrease in “effort to revenue” instead of just “increases in revenue.” Allow me to elaborate.
Whether you’re self-employed, running a small business or team, or operate a multi-hundred person organization, the number one goal of your “for-profit” organization should be capturing revenue. Revenue is the driving force behind everything you do.
Don’t believe me? Have you ever noticed how non-profits (charities, for example) need revenue to accomplish their charitable goals? Every organizational mission needs cash and credit in order to be fully accomplished. To put it frankly, any company that says revenue is not important is going to lose in the market, because lack of revenue equates to a lack of sustainability.
“Any company that says revenue is not important is going to lose in the market, because lack of revenue equates to a lack of sustainability.”
When you get started though, one hundred percent of your effort drives one hundred percent of the revenue. You’re laboring to close deals, and guilty when you take time for yourself because the creeping thought of “I’m leaving money on the table” occurs whenever you find down time. So eventually, you hire. Congrats! You’re now applying less of your effort to close deals… or are you?
While you personally might be working less, it’s very likely your company is still working the “100%-100%” ratio: one hundred percent of the company’s effort is earning one hundred percent of the company’s income. At first you think it’s great that all the labor isn’t on your shoulders, but as soon as your employees dip in their productivity, your company takes a nosedive. I can picture the anxiety now… perhaps you’ve felt this before?
Start here: instead of only focusing on increasing revenue, consider aggressively decreasing your company’s “effort to revenue.” You earned $1,000 today? Great. Now do it again but in less time, and with less effort. This is a profound ideology my friend Judge Graham (who is one of the masterful keynote speakers at the next Obsessed Conference) has implemented successfully as recurring models in multiple businesses. In fact, this obsession with eliminating effort to revenue has been successfully implemented in Obsessed Academy; 85% of OA’s income is residual, being earned one time, but being collected for many months or years. This model has allowed our company to grow consistently, without always starting back at zero on the first of every month.
Yes, we’ve focused on increasing revenue as well; increases are vital and should be goals on your calendar. But, in the same breath, we’re relentlessly working towards eliminating friction to revenue by shortening sales cycles, implementing recurring models at lower and higher levels of financial commitment, and establishing a business structure that allows income to be collected continuously, but earned once.
Have you ever considered what your business would look like if you could simultaneously eliminate barriers to profit, and grow your business? Have you successfully implemented a recurring revenue stream into your business model? Tell me about it on Twitter or Instagram; I’d love to hear from you about what’s worked, and what hasn’t.
If you’re still struggling with how to grow, or you desire to increase your business without sacrificing your friends, family, or mental stability in the process, sign up for Obsessed Academy or privately contact me to discuss your options.