The 3 Part Formula For Rapid Business Growth & Acceleration – The KPIs (Part 2)
So far, we’ve taken a deep look inside and analyzed our business. After that, we talked about what steps you need to achieve Rapid Business Growth.
Now we’re taking it a bit further. We’re talking about an important part of every business; KPIs.
Sounds boring right? Ok let’s change it up a bit.
How about only needing to know to 3 key numbers in your business, and by knowing those numbers and having them in good health, you could guide your business easily to a fully automated, income producing machine.
Sound better? I think so. So which numbers do you need to know then…
First, we need to get on the same page and understand what a KPI really is…
What are KPIs?
A Key Performance Indicator(KPI) is a measurable value that demonstrates how effectively a company is achieving key business objectives. KPIs are, in layman’s terms, simple analytics tools.
KPIs are here to make your life easier, they are here to help you make smarter decisions. In that regard KPIs are priceless.
But similar to everything today(especially when you want to get free leads), you can easily get paralysis by analysis. You don’t have the luxury, as a business professional, to spend huge amounts of time analyzing KPIs.
Just a few decades back KPIs were very simple. There were revenue, profit, and growth. But today, with new technology emerging every day, you’re bombarded with analytics tools.
And I’m sure today, more than ever, it’s important to revert back to the simplicity practices that were used a few decades ago.
Simplicity is your best ally and can be your USP (Unique Selling Proposition). Don’t get me wrong, it’s a good thing that you have so many KPIs to choose from, but it takes practice and burning yourself a few times to know…
…which KPIs to Choose
What is the first thought that comes to mind for the word KPI or Analytics? For me, it used to be boredom and reports. Now it’s just money $$$.
Yes it’s true. KPIs and Analytics should focus on bringing money, but too often, entrepreneurs focus on unimportant metrics.
Although this can work for some businesses, for most it’s just an excuse to procrastinate.
As with any part of analytics you get heaps of KPIs to procrastinate on; khm to choose from 😛
Here are some of the more important ones:
- Sales KPIs – New vs recurring sales
- SEO KPIs – Number of backlinks
- Content Marketing KPIs – Newsletter sign ups
- Social Media KPIs – Click through rate
- Business Development KPIs – Number of partnerships established
- Project Management KPIs – Number of goals achieved in time
- Financial KPIs – Gross Profit
When you just look at all of these you get a little bit dizzy, right? Don’t worry, there is a simple way of solving this. But one thing is for sure, you have to …
…Choose Your KPIs Wisely
I used to focus on every single KPI possible. Let me save you the hassle: “It’s time wasting and time-consuming.” After a while of doing so, I changed my approach and doubled my efficiency and lowered my stress levels.
You’ve probably heard of the Pareto principle. It can be used in almost every walk of life, but it’s mostly used in Business. The Pareto principle states that for many events, roughly 80% of the effects come from 20% of the causes.
The basic goal here is in fact to, choose the KPIs which will show you exactly which 20 percent of customers produce 80 percent of your profit.
A Pro tip: Determine which KPIs are your 20% that get you 80% of results and focus solely on those. You can delegate all the other KPIs.
This approach will improve your most important KPIs, save your time and make your company a well-oiled profit making machine; which is what we all strive for.
So with that, taking all these factors into consideration and applying over a decade of experience here are …
…My Suggestions for
which KPIs to Choose and Why
All these numbers are great and play their part at telling you important details or indications on the direction of things so you know when and if you need to take action or a different approach.
EG if your Total Sales are flat or falling but Net Profit is rising, you’re actually doing good. It’s like you’re getting better at operating by cutting costs and being more efficient.
If you’re open rates (when sending emails) are not great, that suggests you need to get better at writing good subject lines.
As a solopreneur or small business, we’re always pressed for time and the question that comes up again and again is…
“Which ones do I REALLY need to focus on?”
To answer that we have to agree that our primary goal above all else is to make sure we’re getting money in the bank.
It keeps the doors open, it means we have customers, it allows us to keep our vision alive and ultimately enables us to execute on our greater purpose beyond the revenue, whatever that may be.
So with that in mind, and with the goal of rapid acceleration and growth from Part 1, there are really only 3 numbers you need to focus on.
Here are the 3 KPIs that matter at the end of the day for small business owners.
New Business Acquired
How much revenue came from new customers paying you for the first time.
Aim for between 20 & 50% of total revenue for the month.
Anything less than 20% suggests you’re not growing very fast or strong.
Anything over 50% and you don’t have a strong strategy for keeping customers around. It could be you haven’t created a product or strategy to allow people to pay you more than once.
Or perhaps you have that, but people are not happy with the product/service and aren’t buying again. Maybe they would be happy to but you haven’t made it obvious enough to them that there are other opportunities for them to be blessed with your awesome offering 😉
Either way, keep this one above 0 at all costs (zero means zero growth) and not so high that you’re having to find new customers every single month just to keep the doors open. (too stressful, nobody needs to operate that way anymore).
How much revenue is from customers who have already paid you before.
If you have no revenue coming from Retention, then it means you’re having to work your butt off every month to bring in new customers to sell to them once, so you can pay the bills, take a wage, and then next month start it all over again.
Until you have this one in place, your business is often not worth much in terms of selling it. Any new owner will need to be drumming up sales instead to get the revenue to come through the business.
Once you DO have this in place though, suddenly your business has systems, has automation. Money comes in every single month whether you do any marketing or not. That has value. That is a REAL asset. And people will pay well for that.
You want this as strong and healthy as possible. Aim for 50-80%
Less than 50% you may still be working on your recurring revenue options for customers (that is money that they pay you each month or regularly without you needing to sell to them again).
Anything over 80% signals a really strong revenue model in your business. Too far over though and you may not be growing your new customer base enough.
Business from Referral Partners
You’ll always find people who feel proud about how they “don’t do any marketing, it’s all been word of mouth”. But not you right? 😉
DON’T BE THIS PERSON.
If all of your leads and customers come from other people casually referring you, you have no way of knowing how much business will come in next month. You cannot plan ahead, and that makes it really difficult to hire and build your team or invest in marketing and other systems.
These are all things designed to help free you from the business to work on the more important and strategic points, spend time with your family, take the dam holiday you’ve been talking about for the past 5yrs.
But hang on, the title of this section is literally called; “Referral”
So what do we mean here?
In this instance, we’re talking about established Referral Partners. That is, complementary businesses, that share a similar type of audience/target market to you, that consistently referral you new leads or customers.
In return, you may be paying them a kickback, or doing some sort of cross promotional deal. You refer to them, they refer to you.
A great strategy with this is getting your business to a point where you have at least 5 establish referral partners bringing in a roughly equal amounts of business each month for you.
This gives you a very strong stream of leads, allows you to not worry too much about marketing, and protects you against any one of those relationships going sour and needing to be replaced.
As with Retention, you want this number high. Less than 10-20% suggests you’re getting the ad-hoc mention here and there. People may not know how to refer you or why they would bother.
Higher is good but again up to a point. More than 80% suggests you may not have enough other established channels to bring you new leads consistently such as LinkedIn, Facebook Ads, SEO, etc
How To Apply All This
Now you can go through the process of working these numbers out each month manually but that wouldn’t be something congruent with Rapid Acceleration & Growth.
To get ourselves to this third stage of business evolution(Rapid Business Growth) we have to be looking at automation and systemisation at every possible step, every corner, every nook and cranny.
So rather than do it manually and having yet another thing to add to our todo lists, let’s just have it done automatically, and available in real-time, whenever we need or want to know the information.
We’ve put a lot of effort into creating EXACTLY this for our customers. Here is what it looks like in action.
If you want to see what your numbers are, you can sign up for a free trial of Ninjodo here and accelerate your business growth by focusing on the most important parts of your business.
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