T H E KPI GUIDE F O R ENTREPRENEURS

Transcription

1 T H E KPI GUIDE F O R ENTREPRENEURS Scale Your Business Faster Than Ever By Knowing Your Numbers scale2x.com

2 TABLE OF CONTENTS

3 THE KPI OVERVIEW What gets measured gets managed. - Peter Drucker And what gets managed gets done! Want more business results? Of course you do. We all do. And I m here to tell you that getting those comes down to a few key things One of which is knowing your numbers inside and out, starting with a few Key Performance Indicators. KPIs: You ve heard about them before. You know their importance but are you tracking and monitoring them consistently? Or are you too busy with the day-to-day of your business like most entrepreneurs to make time for the numbers? Well, this guide is intended to forever change that. My goal is to help you: Once and for all become a master of your business' numbers Identify the most important metrics you need to monitor And to get set up tracking these KPIs consistently. If you cannot measure it, you cannot improve it. It s time to improve your business more than ever, starting with a handful of Key Performance Indicators. Let s get started... - Lord Kelvin Get The Insight You NEED To Scale Your Business

4 ABOUT AUSTIN NETZLEY E N T R E P R E N E U R. I N V E S T O R. A U T H O R. After working with hundreds of entrepreneurs and business owners over the past few years, I realized this: There s a formula to a successful business. So what we ve done at 2X is put together this formula specifically designed for 6 and 7-figure entrepreneurs to follow to help you more than double your business in just 90 days. One of those key pieces of our framework is this: Mastering Execution By Knowing Your Numbers This guide is all about those numbers to help you scale. See more about our story here: (click to open the video)

5 TURN YOUR BUSINESS INTO AN ATM MACHINE Why did you start your business? Seriously, what do you want out of your business? Most people want some combination of more wealth, freedom, control, upside, impact, and opportunities. But one factor that you can t deny is this: Money. You re reading this 2X Guide to help you make more money (and to do so in an easier way). And nothing can help you make more money quite like owning your own business. Put it this way. If you invest your money into the following, you ll get these types of returns: Savings account: 0-1% per year Government bond: 4.25% Stock market: ~9% (with big volatility) Real estate: ~7.5% But your own business? Most small businesses we work with easily make % or more on their investments into their own business.

6 There are a LOT of ways you can make millions But nothing compares to the ROI that a successful business can produce. Nothing.If you do it right, you ll accomplish what few business owners do: You ll create your own ATM machine. What this means is that once you get to be confident that you can put $1 into your business and turn it into more than $1 consistently and repeatedly, then that s when you can start to invest more and more into your business. That s when you ve hit the business goldmine. But to get there, we have to not only make a great offering (which we ll talk about later), but you have to be confident and know your numbers inside and out. This guide will be a key step in getting to your own ATM machine.

7 KPIs EXPLAINED Let s start with the basics If you don t know your numbers, you don t have a business. KPI: Key Performance Indicator A good definition I saw from Avinash Kaushik is: Measures that help you understand how you are doing against your objectives. Very simply, they re numbers that tell you the health of your organization. The numbers tell the truth. They show you reality And for most entrepreneurs, reality stings a little bit! But just because you don t track the numbers, doesn t mean it s not happening! Scaling your business starts with first learning where you re at. Specifically, learning the numbers inside and out to find the gaps, and then tracking and monitoring a few key numbers to monitor your activities to see how well you re doing (or not). There are a few key elements of a KPI: They re specific and measurable They re important to drive the results of your business They re easy to understand They re tracked regularly They re visible And they re only good if you use them.

8 The numbers drive what the strategy should be. The strategy drives the actions. The actions drive the results. Then, we re back at some new numbers and from there repeat this cycle. N U M B E R S STRAT EGY ACTIONS

9 LEADING & LAGGING KPIs One important thing to do with KPIs is to split them up into Leading and Lagging. I first learned about this in The 4 Disciplines of Execution from Jim Huling and it forever changed the way we measure our numbers. Most people focus on the goals and results (i.e. Revenue), which are Lagging measures... But what actually drives that goal? What can we best influence and manage day-to-day to get the results we re after? That s what Lead measures (or Leading KPIs) are. Here s a video that explains the difference in more detail with a few examples: (click to open the video) LAGGING KPI Measures the Goals & Results LEADING KPI Measures Activities That Drive the End Results You ll want to have a good mix of both, but the real value is from driving the Lead measures day-to-day and week-to-week as they ll be your best bet to drive the Lagging results you want.

10 WHERE TO START Before we start to breakdown the details and numbers to track, and a simple dashboard of how to track them, just start simply with a brainstorm. The first step we work 2X clients through before we come up with a great strategy or anything is to learn where they re at. Specifically, what do the numbers tell us. So, what I want you to do first is this: 1 Brainstorm 25+ metrics in your business that you can track to tell you the health of your business. Don t worry what s most important yet, just start with a brainstorm. 2 List out why you ve either had a great past 90 days or why you re behind your goals. What numbers or measures show why that is? For instance, if you re behind on sales, maybe it s a lack of qualified leads that you ve had for your business. Write all of those down that come to mind. What we re trying to do is to be able to better understand the future of where you re headed by tracking the right numbers. What numbers will best tell you if you re succeeding or struggling in the future? ACTIONS: Put 15 minutes on the clock, and go! Scaling Your Business Starts With Knowing The Numbers

11 6 RULES FOR KPIs Here s the reality: Not all KPIs are created equally. Not everything that counts can be counted, and not everything that can be counted counts. - William Bruce Cameron It s not only important to track the numbers, but WHAT numbers you track are also absolutely crucial. Beware of The Vanity KPIs! Most people love to track a few simple numbers that just aren t that important. For instance We could track website visitors and Instagram followers as some of our KPIs, but those are not in the top 20 numbers that I need to know. That s not the 80/20 of our business. They re easy to track and would be controllable, but they re vanity metrics. They don t tell me what I really need to know. You don t need a ton of numbers to be able to see what s really going on. To help you figure out what does matter and what you should put emphasis on, here are 6 rules to keep in mind:

12 1 DOES THIS KPI DRIVE THE END RESULT YOU WANT? Directly or indirectly, if they re not tied to the end result then they re not essential to track regularly. Start with the end in mind; what is it that you really are aiming to do? What are the goals? In the 2X framework that I mentioned earlier, it always starts with the Vision. That helps make EVERYTHING else easier. See a 7-minute breakdown of this framework here: Get clear on that Vision, and we can then come up with the best strategy and approach to making it a reality. 2 DOES THE CUSTOMER CARE ABOUT IT? If your customer doesn t care about it or it doesn t impact them, then it very likely doesn t matter! Your customer should be at the center of your business, and think what really matters to them. Your business comes down to: 1 Getting customers 2 Keeping them The top KPIs you track will go to one of those two areas, and anything else is vanity. 3 IS IT SIMPLE AND DIRECT? A confusing KPI is one that will soon not be used. Make it so that it s clear what it means and ensure the key members understand it.

13 4 SET STANDARD AND STRETCH GOALS. We always like to set a baseline (or standard) goal that we re aiming for, as well as a stretch goal. This allows us to have an aim for what we re going for. Then match that with the next item below and you can really see if the result of that KPI is good or bad... 5 COMPARE ACROSS MULTIPLE DATA POINTS. A number by itself is useless. But compared week over week for months, you can see a trend and really see what s going on. One of the single best things you can do with your KPIs is turn each of them into charts and graphs. These will tell you the story quickly. We ll go deeper into these charts and graphs with a simple Dashboard you can create a bit later in this guide. 6 IS THIS MEASURE RELATED TO THE 80/20 OF YOUR BUSINESS? Again, this helps with being distracted by vanity metrics. How many website visitors we have is cool to see, but that s not one of our top strategies to grow So we don t put much of any emphasis on driving this result directly. First figure out the 80/20, highest leverage actions that you re going to take to grow your business Then let s tie in a few key metrics that will tell us how that particular strategy is going. Then focus on, monitor, and hold people accountable to those key metrics.

14 IDENTIFYING THE KEY BOTTLENECK Have you covered your Value Chain to see where the bottleneck is? You ll want to have KPIs across the key elements of your value chain so that you can identify what area is really holding your business back. This is a very important element of the KPIs. For a full video explanation on this, watch this video here: (click to open the video) ACTIONS: 1. Watch this video above. 2. Identify your Value Chain steps for your business 3. List out 1-3 key measures for each channel.

15 THE TOP 10 LIST The top KPIs that you need to track and know at any time are often different for every business. Sure, some will be similar (i.e. Profit) but you re going to have to figure out what the most important numbers are for YOUR business. Here s a guide to get you started as these are often the Top 10 KPIs that we help our clients track and monitor: 1 PROFIT I hate to start with a super obvious one, but this is a must. Everyone gets held up on Revenue, but I don t care nearly as much about that as I do in how much you re taking home each and every month! Profit is paramount. QUESTIONS: Do you know your profits? (You d be surprised how many don t.) If not, let s start there. You need to understand this even if it s zero. How often are you being updated with your profits? POTENTIAL KPIs: Profit ($) Profit Margin (%)

16 2 CASH Revenue is vanity, profit is sanity, but cash is king. Number one, cash is king... number two, communicate... number three, buy or bury the competition. -Jack Welch Cash is the oxygen that fuels growth. -Verne Harnish Got it? Cash is pretty important. I get daily text of my bank account balance. There can be one hundred stories about what s happening in our business, but I care about what s actually happening. What is the cash? That s what I want to know. I recently asked Grant Cardone what numbers he s looking at and monitoring...

17 Check out his response in the video clip here: (click to open the video) QUESTIONS: What are 3 ways you can improve your cash position and continuous cash flow in your business? Do you have two months of expenses saved up? Not related to your business directly, how is your personal cash position for you and your family? Do you know your monthly free cash flow being produced? POTENTIAL KPIs: Cash Balance Free Cash Flow Produced Core Capital vs. Target

18 3 CUSTOMER SATISFACTION I mentioned earlier that your customer should be at the center of your business. They are the ones that pay the bills and drive the key end results (your wealth), so let s get them involved. Want to know what studies have shown to be the #1 indicator of your growth? Well, it comes down to one simple question to your customers: Would you recommend this company to a friend? One of the key metrics that nearly all businesses should have their own version of is called NPS - Net Promoter Score. This was created by Fred Reichheld and has been proven to be "The best predictor of top-line growth." QUESTIONS: Do you have a consistent way of getting customer feedback and input right now? What points in your purchase and delivery can you insert ways to get this feedback? POTENTIAL KPIs: NPS Case Studies / Testimonials

19 4 EMPLOYEE ENGAGEMENT/SATISFACTION Very much related to tracking your customers feelings about your company and offerings, it s vital to understand how your employees feel about their role and the company in general. They are the lifeblood of your organization, and one of the pillars of scale. So you have to regularly get a pulse of what they think and how you can improve. We measure what we call enps which is the same as NPS but for our employees. This tells us objectively how they feel about their role, the company, our culture, their pay, etc. Happy and hungry employees are one of the key 4 forms of business leverage, so get this feedback and optimize their experience to drive results. QUESTIONS: Have you ever tracked employee satisfaction or engagement? If not, start now! How often are you engaging with your employees and contractors to see how they re doing, what they need from you to succeed, and ensuring they re set up for success? POTENTIAL KPIs: enps Employee Retention

20 5 CUSTOMER LIFETIME VALUE (LTV) Very simply, what you re trying to understand is how you can have a customer that is worth a lot more than what it costs you to acquire that customer. Once you get to that point, it s then a matter of scaling up as many customers as you can get. So, another Top 5 number is the lifetime value of a customer. How much does someone pay you, and what is that profit? Marketing expert Jay Abraham talks about the 3 ways to grow your revenue 1. Get more customers 2. Increase the average transaction value 3. Increase the frequency of repurchase The last two are related to LTV. QUESTIONS: Have you been tracking the average customer lifetime value? What are three ways you can easily increase your average LTV that you can implement in the next 30 days? POTENTIAL KPIs: LTV ($) Average Transaction Value ($) % of Repeat Customers (%)

21 6 CUSTOMER ACQUISITION (CAC) One of the most important marketing KPIs is CAC - cost to acquire customer, or customer acquisition cost. Again, you re going to compare this to the LTV and work furiously to increase LTV while reducing CAC. A great goal to get to is to be able to acquire customers and break even as quickly as possible. Then, anything that happens after is pure profit. Many of our clients are able to drive marketing strategies that have them breakeven in 14 days or less. That means if they spend $10k on advertising, they ll get back more than $10k within 14 days. And their main sales happen after that period, which is then pure profits. QUESTIONS: How much does it cost you to acquire a new customer? How can you buy customers for free (by breaking even asap)? What is your best repeatable channel to acquire customers that is ROI positive? POTENTIAL KPIs: CAC ($) Break Even Time Period (Days) ROI (% or $)

22 7 LEADING MARKETING INDICATOR Then, with your brainstorm list go ahead and identify which KPIs are Leading indicators. What you want to focus your growth efforts on are things that you can control much more effectively than resulting metrics. For every business, there will be some leading marketing indicators that can help drive your sales. Depending on your business, these may be things such as: # of applications, sales leads contacted, website visitors, sales calls scheduled, website visitors, cost per lead, etc. For us, we re tracking qualified applications per week and sales calls scheduled per week. We work to make sure that the goals are hit for these metrics, and that leads to growth in sales and profits. QUESTIONS: What are those key 1-2 marketing metrics you can track that will lead to more bottom line results for your business? What s the highest leverage marketing channel that you need to track metrics for weekly? Are your marketing metrics displayed and communicated regularly with the proper people? POTENTIAL KPIs: New Leads (#) Pipeline Value ($) Qualified Applications (#)

23 8 SALES As I mentioned in the value chain video, what you want to do is find out for each key element of your business where the real bottleneck is. One of the key elements of every business value chain is of course sales. Track the key metrics in detail and watch your earnings go up. QUESTIONS: If you could track one metric related to your sales, what would it be? What are 3 ways you can increase your sales conversions by at least 10%? POTENTIAL KPIs: Sales Conversion (%) Avg. Time to Close (Days) Avg. Order Value ($)

24 9 LABOR EFFICIENCY Labor productivity is hands down the #1 thing that changes profitability. I mentioned that employees are one of the key forms of Leverage. But they can also be the thing that holds you back. I have a full mini-masterclass training on hiring that you need to check out. Get free access here: But one of the key numbers to track ongoing will be how efficient and effective your employees are. What you want to see over time is that you re getting more and more value (Profits) per employee dollar spent. Track and optimize this over time, and you re going to be a happy business owner. QUESTIONS: What key measures do you need to look at to measure an employee's effectiveness? Do you track your employee overhead as a % of revenue and profits? POTENTIAL KPIs: LER - Labor Efficiency Ratio Employee Overhead vs. Revenue or Profit

25 10 FULFILLMENT We can t forget about fulfillment! This is where most businesses either succeed or fail (not marketing). So it s essential to evaluate what key numbers that can help you measure the success of your delivery or fulfillment of your offering and maximize this. Don t have fulfillment take all of your time or create a bad experience for your buyers. Create a machine, starting with great fulfillment. QUESTIONS: What key metrics for your fulfillment/delivery will tell you how well this area of your business is doing? Within fulfillment/delivery, what is the big bottleneck that is holding you back from scaling? POTENTIAL KPIs: Time to Deliver Projects (Days) % Renewal or Repurchase (%) Profitability Per Product (%) % of Expenses In Fulfillment (%) There are a lot more KPI categories that could be super important (such as Growth, Customer Service, etc.), but the biggest goal that we re trying to accomplish is to SIMPLIFY.

26 We have a formula that we talk about daily at 2X and it works wonders. It is... SIMPLIFY + STRATEGY + SYSTEMS = S C A L E Business is hard enough as it is, and us humans have an awesome ability to make it way harder than it has to be. Let s keep it simple, first and foremost. And to help you do so, let s talk about...

27 ONE CORE METRIC Set Yourself Up to Succeed By Mastering Simplification The path to success is via ONE. ONE focus, ONE core bottleneck, ONE key action at a time. And what we want to do is to try and simplify your business focus down into ONE core metric that your entire company can be aware of and help drive. For us, this metric is what we call LTW (Lifetime Worth) - which is LTV + Referrals LTV. So, our core focus is to not only keep clients, but also to have them love us so much that they refer others to us. This is our ONE core metric. Jim Collins talks about this one core number as being Profit Per X, which represents the underlying economic engine of your business. The top metric (numerator) can be whatever key metric you want - Profit, Revenue, Clients, Products, etc. - but the denominator (X) is fixed and represents your approach to scale. Two examples of this from the great book Scaling Up are that Southwest Airlines metric was profit per plane and profit per booked appointment for another company. Think about how you can simplify your metrics down into ONE that will tell you so much about your business and where you re headed. Then put this front and center on your Dashboard (more on that in a minute)

28 TRIMMING DOWN YOUR LIST Ok, so you ve brainstormed a bunch of potential KPIs, and we talked about your Value Chain, the Top 10 categories, as well as figuring out ONE core metric. Now it s time to trim the list. If it s too overwhelming, it will feel like more work than is necessary and you won t use it. Trust me, that s what I ve done numerous times. So here s what to do: 1 2 Trim down your list of KPIs to a maximum of 15 metrics. It may be tough to do, but it s so worth it. Then, put a name beside each one who owns that metric. They re responsible for updating it, driving the plans and results for it. If you re a solopreneur, then your name is beside all of the metrics. But what you ll want over time is to have your name beside less and less, and eventually to have each team member to have 2-3 key metrics that their role is responsible for. 3 Now, once you have a trimmed up list, it s time to...

29 MAKE IT VISUAL WITH A KILLER DASHBOARD What you focus on gets done. Period. So it s great to learn about these KPIs and think what key metrics you need to know for your business, but it means nothing if you don t track it ongoing. Millions of people love sports for a big reason: To see their team win. And you only know if your team wins if there s a scoreboard! You need to take a lesson from this thinking, and make sure it s clear whether your team is winning or not with a scoreboard for your top KPIs. A dashboard helps do just this. To learn how to create a dashboard, check out this video and article on exactly what to do step by step: (click to open the video)

30 Here are a few examples of what some charts from your dashboard could look like: To get access to the Dashboard template, simply go here:

31 There you ll find the exact spreadsheet you can use to have your own Dashboard setup, along with the special training to make this as easy as possible. The key elements of a great Dashboard are: It s simple so that you keep using it! It s focused on the numbers that matter. It s updated, visible and accessible to your organization so that It clearly shows if you re winning or losing, and where the big bottlenecks are. Remember: The numbers will tell you what you need to know. They give you a dose of reality. It s tough to face a reality that isn t ideal, but it s 100% necessary to ultimately get to where you want to go. Start with the numbers. Create a dashboard to understand and monitor them. Change your strategy and activities based on them And you ll grow faster than ever.

32 ACTION STEPS Ready to get started and apply these KPI lessons to your business? Start here: Watch the above 5 videos: Brainstorm the top 20+ KPIs for your business Put names next to each KPI for who will own it Identify your top 3 most important leading and lagging indicators Come up with ONE core metric that can tell the most about the health of your business Set up a simple numbers dashboard (we prefer Google spreadsheet) Map out your Value Chain in detail and key metrics for each step Track and monitor the numbers, adjust your actions accordingly, and repeat! Then you re ready to SCALE! Remember: The numbers will bring clarity to your business, what you should do, and where the bottlenecks are. Take this guide and these action items seriously and take a major step towards better and faster growth by getting very clear on the numbers. Stop being a busy entrepreneur. Start being a successful CEO and Owner And scale your business faster than ever before.

33 The Proven Path to Double Your Business (In Just 90 Days) If you need help coming up with your top KPIs, detailing out your business value chain, and want to scale it faster than ever, we can help. We have a hands-on 90 day coaching program designed for 6 and 7-figure entrepreneurs. We focus on helping you turn your company into a systemized, scalable business and grow it faster than ever before. To get a free 1-on-1 business breakthrough call to evaluate your business and see if you qualify, schedule your call here: You need to find people who will give you results. That s what these guys (2X) do. - Ryan Pancheri, 8-Figure Entrepreneur "I learned that before 2X I didn't have a real business; I had a hustle'. Now I have a real business that is way more streamlined, scalable and systematic than ever. - Perry Jeffries III, Entrepreneur and Financial Planner "This has literally transformed my business. We were already doing well, but any entrepreneur wants to take their business to the next level. To do that, you need a foundation that allows for success. Austin came in and implemented some systems and practices that literally skyrocketed the growth of our business. BUT the greatest thing about it is, it allowed me to delegate and my quality of life skyrocketed along with it. More freedom, more time with my family, and I wasn t putting in these 14 hour days to grow and sustain my business." - Kirk Noles, Serial Entrepreneur