Recently I was working at an early stage business which was not turning over regular revenue each month. The management team were at a loss as to what KPIs they could measure, which would be useful for reviewing in Board Meetings, for prospective investors and team management. Typical example KPIs for most established companies are metrics around revenue, margin – gross & net, client satisfaction, market growth, faulty goods returned, complaints etc. Using a Balanced Scorecard approach this would be extended to employee and other stakeholder satisfaction metrics (The Balanced Scorecard approach works on measuring progress on metrics in Finance, Internal Business Processes, Learning and Growth and the Customer). However what if you are not (or barely) revenue generating? What do you measure?
For many web based or social media businesses this is easy – impressions(hits) on the website, app downloads – growth per month, click-through rates, results of traffic increase from SEO spend, PPC spend effect on traffic, Then you move from conversion of traffic to trials of products or increase in time spent on your website. If your business is looking to build up a user base as opposed to monetise just yet – these are all useful metrics. However what if you are selling an actual product now – be that SAAS or a piece of kit?
The key maxim as always is “KPIs drive behaviour” or in more basic form “What gets measured gets done”. Certain activities executed well by the team will move the company along the path to making initials sales then to increasing sales. Of course there is the age old predicament of ‘Doing the right things’ and then ‘Doing the right things well’. As in – effectiveness versus efficiency is another thing which much be considered – i.e doing the wrong thing in a hyper efficient manner will not help you. An example being – you pick the wrong segment of the market to sell to initially – perhaps you are selling where your value proposition is not strongest and buyers are most risk averse. In that case calling all the people in that sector as quickly and professionally as possible will not lead to sales (although the speed element will assist you in learning you error more quickly it must be said). Hence the moral of the story is – you need to measure “Outcomes” along with “Process Activities” – Effectiveness and Efficiency.
Example process based around Sales Growth (the lifeblood of a business):
Step 1 – Have a focused strategy for growth with key milestones and stages.
Do not broadbrush and try attack many market segments. Pick one sizeable niche and focus all of your company’s efforts here. (We will examine using the “Crossing the Chasm” approach in another blog on how to pick the right niche and how to attack it)
Step 2 – Take each stage and decide what activities/behaviours will drive progress through that stage. Decide what metrics define success and completion of that stage.
Step 3 – The KPIs you need to measure both in activity and outcomes will come from Stage 2. Form targets around these for key individuals or teams.
Step 4 – Execute, measure and review periodically – activity can be measured weekly – outcomes often better to be measured monthly.
Recently we worked on just this project with a client – we cannot divulge names as it’s currently in motion.
We picked a target market which was a sizeable niche based on where we knew the value proposition to be strongest. First off we listed all the potential clients in that sector in a certain geography. Based on what we knew about each potential client (size, company culture, contacts there) – we segmented them into likely Early Adopters(Visionaries) or Early Majority or Pragmatists.
We then simply built us excel sheet to monitor stage one which was getting reference projects and sales with the Early Adopters and assigned Managers with targets to push through an on-boarding process within a specified time period. Once we had five early adopters – the stage was deemed complete and we pushed ahead with the plan for the Early Majority stage which would require feedback and proof points from the Early Adopters.
This is a simple example of how KPIs can be built up – even when you have not the comfort metrics of revenue and margin to measure monthly – you can measure progress scientifically to push you towards your goals.
Author: John Rowland, Managing Partner, White Lake Group