Have you ever struggled to set Key Performance Indicators (KPIs) for your team or wondered if your KPIs are reasonable?
In this episode, we delve deeper into the world of KPIs and their crucial role in the success of your online business. Whether you’re an online course creator, have a membership-based business, or are an online coach, understanding how to set and track KPIs is essential for achieving your goals.
By the end of this episode, you’ll have a solid understanding of how KPIs can serve as the foundation for your online business’s growth and success. You’ll be equipped with practical tips and strategies for setting and tracking KPIs effectively and ensuring that you and your team are aligned, motivated, and focused on achieving your business objectives.
Don’t miss this opportunity to level up your online business by mastering the art of setting and tracking KPIs.
In this episode, you’ll learn:
- The importance of KPIs in providing a clear picture of your business’s health
- How KPIs allow you to track, measure, and evaluate progress towards your goals and make necessary adjustments to stay on track
- The difference between leading and lagging KPIs (with examples)
- Expert guidance on how to identify the KPIs that are most important for your unique business and its goals
- A step-by-step process for reverse-engineering your goals to create actionable KPIs
- How to empower your team by involving them in the goal-setting process
- Strategies for making your KPIs visible to your entire team, fostering accountability, collaboration, and a shared sense of purpose
- Tips for creating an efficient system for tracking your KPIs so that you can easily review and analyze data to course-correct when needed
Links & Resources:
- The Art of Online Business website
- DM me on Instagram
- Visit my YouTube channel
- The Art of Online Business clips on YouTube
- Full episodes of The Art of Online Business Podcast on YouTube
- The Art of Online Business Podcast website
- Check out my Accelerator coaching program
*Disclosure: I only recommend products I use and love and all opinions expressed here are my own. This post may contain affiliate links that at no additional cost to you, I may earn a small commission.
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And. All right. What’s up, my friend? Welcome to today’s Quick Tip episode here on the podcast, Rick here. We’re going to be talking about KPIs today. If you’ve ever had a difficult time setting KPIs for your team or maybe wondered if what you’ve come up with in terms of the KPIs for your team are even reasonable, This quick tip episode is is going to be for you. This is a question I get asked quite a bit and it came up recently and because it’s such a common question, I wanted to do this episode here for you in the specific question was like, How do I know if my KPIs are reasonable for my team? Well, if you’ve been listening to this show for any period of time, you know, I’m all about the numbers. I’m all about the data.
The numbers tell the story of what’s going on. And as you’ve heard me say before, maybe they have no meaning. The numbers have no meaning unless the meaning that you assign to them, they’re neutral and yet they’re the foundation of your business. Because if you don’t know your numbers, your, you know, your you have no insight into what’s actually happening in your business. Is it healthy or not? And so first, let me just clarify for those of you who aren’t really like KPIs, what are you talking about? Rick Key performance indicators. And they’re super, super important, as I just mentioned, to have in the business because at a high level, they allow you to track, measure and evaluate progress toward a specific goal or goals.
Basically, what you’re trying to achieve in your business, what’s the reason for your business? And they allow you to see if you’re on track, you’re off track toward that goal or goals so that you can make changes or measure your progress. Et cetera. And they can also motivate your team because your team has tangible results that they’re working towards, and then they get to see their progress towards those results. Now, you may have heard me talk on the show here previously, or maybe if you’ve been a student of mine in the past, you’ve heard me talk about the health of your overall business. So when I go to the doctor for a checkup, I go in and usually a nurse takes my vital signs, my pulse, my blood pressure. Et cetera. And all these numbers that are being taken gauge my health. These are like these are my body’s vital signs. They tell a story and your business is no different. So I want you to start by asking yourself, what are the vital things in your business that are most important to the health of your business?
Things like leads, like revenue, profit, customer success? Probably not the number of Instagram followers that you have, you know, unless you’re an influencer or something like that, right? If you’re not measuring those things, how do you know how well your business is doing? So deciding which KPIs to measure when you’re deciding that it’s important to understand first and foremost, the difference between leading and lagging KPIs.
You may have heard those terms before. Most of us, when we’re thinking about measuring a goal or KPI or something like that, we’re looking at the lagging indicators, meaning we’re measuring something that’s already happened, right? So looking at your previous month’s revenue, well, that’s a lagging indicator. That’s a lagging KPI. If your goal was to hit, you know, whatever, $40,000 last month and you find out within the first week of the next month measuring the previous month’s revenue and you came in at 32,000, which is still amazing, by the way, came in at 32,000. Well, it’s kind of hard to do anything about it at that point because, again, that’s a lagging indicator. It’s measuring something that’s already happened. And so let’s start with the leading indicator.
And that’s, again, something that most people don’t really measure or look at. And I and I hope to make the case here for you today to start measuring that. So an example of a leading indicator leading KPI is something that helps predict future performance. And in general in general, there’s always different. Concepts for leading indicators and so forth depending on your business. But in general, these are the things that you’re doing to try and accomplish a goal. Things that you can control. So let’s do a hypothetical here. Let’s say, for example, that you’ve got a membership and your membership accounts for 80% of the revenue in your business.
Cool. But you have a churn rate of 12%, which the 12% churn rate is a lagging indicator, By the way, it’s measuring the churn, measuring a previous month or previous time period. Well, at a 12% churn rate, your membership isn’t going to be around for very long. So you set a goal of dropping that churn rate from 12% down to 5% within the next six months. And so that 5% churn rate, which becomes your goal, that’s a KPI.
It’s a key metric that shows the health of your membership. So why do we even care about this? Well, it’s a key metric that shows the health of your membership. And if your membership is accounting for 80% of your business’s revenue, it’s super important. Right? Okay. So now we have a goal. We want to drop our churn rate from 12% down to 5% in the next six months. So with the goal of dropping that churn, you maybe you work with a coach to help come up with ideas for reducing that churn. And let’s say one of those things that you’re going to do to reduce that churn is analyze the your onboarding process. Another thing might be starting a weekly wrap up email for your members. Another thing might be you set up an automation of an email check in with people who haven’t been active in the membership for three weeks or something like that. So all of those things you’ve decided are critical pieces to try to reduce your churn.
Now, these are all controllable things. They either get done or they don’t. Meaning you either write the weekly wrap up email or your team writes the weekly wrap up email or you don’t get it out. It’s very clear. Right. So did that get done? You know, analyzing the onboarding process, Well, that would be broken down into multiple steps, too. And then are you potentially needing to make changes from that analysis? Well, these are leading indicators because, again, you control whether those things happen or not, but you don’t control is how they affect the churn.
You can control doing those things, but the churn rate becomes your lagging indicator because it’s measuring what’s happened in the past. That makes sense. So the things that you’re doing to to reduce the churn, those are your leading indicators, for example. Another example of a of a leading indicator might be, you know, let’s just say that you sell a program via. Sales calls or strategy calls or whatever you want to discovery calls or, you know, whatever you want to call them.
Everyone calls them the same thing. Another so another example of a leading indicator might be the number of sales calls that get booked. Because if you sell that program via calls with interested people, the number of calls that you book is going to determine how many sales that you make. So the number of calls booked is the leading indicator. The revenue that you make as a result is a lagging indicator.
Right. And again, when it comes to lagging indicators now, these are the KPIs that we often think of, right? So, for example, what was our sales revenue? What’s our profit margin? What’s our list growth number of podcast downloads, etcetera? And for both types of KPIs leading and lagging. I like to set them based on different areas of the business like fulfillment, marketing, sales, operations. So what you’re doing here is you’re setting and tracking the metrics, the KPIs, the data that are most important to the success of your business in these areas. Right.
You’re not setting 50 KPIs. And again, I say the most important of the success of your business, and I’ll say it again, like so many people track, well, how many Instagram followers do I have now? Maybe that’s important based on whatever type of business that you have. But I’ll tell you, for most people, especially ones that I work with in our accelerator coaching program, it’s not it’s not a it’s not a very important metric. It’s a number looks good if you have a lot. Right? But what does it actually mean? Remember the going to the doctor example I used before when I go to the doctor for a checkup and I have my vital signs measured, you know, it goes in, they go into a computer and when I’m in the room with the doctor, the doctor is then looking at this data on a single screen. She’s not scrolling through screens and screens and screens of data.
It’s right there and she can quickly see or gauge my health through that data right on the screen right there. So how do you come up with what the KPIs should be? And this is really what I was asked before about this. Well, remember, they’re based on your goals, what you’re trying to achieve in your business. So what I recommend doing and I’ve talked about this concept here a lot on the podcast, just like when coming up with a sales funnel, I recommend that you reverse engineer from the end from what you’re trying to achieve. So, for example, going back to the membership example that I mentioned before, if your goal is to impact 1000 people this year and which is also going to generate your goal of $500,000 in revenue, awesome.
You work backward from that goal. So if your goal is to impact 1000 people this year and as a result generate 500,000, so that’s $500 per person. So if your monthly membership, in the example that we’re talking about here is $50 a month, well, you need 1000 people staying at least ten months or 2000 people staying five months. You just work the numbers, right? So with that in mind, what are the things that you can do to attract people to your business and then have them want to join your membership? See how this is going. Here we’re simply reverse engineering from what you’re wanting to achieve in your business. So we’re working backwards from.
All right. Our goal in the business this year is to impact 1000 people while generating $500,000 in revenue. Cool. So now you start to work backwards from there. How do we achieve that if our membership is 80% of our revenue? We just start working numbers. Then you break that into goals and associated KPIs, you know, and whether they’re quarterly goals or monthly goals, you got to do whatever feels right to you. And so here’s the key here. You then want to have people on your team responsible for specific results. You’re not assigning tasks to them.
They shouldn’t be just, okay, I’m going to check the box here because I was assigned this. No, they’re responsible for the results. And this is a huge challenge for so many of us CEOs because your business didn’t grow because of your being a CEO. Here’s what I mean by that. Your business grew because you were an expert in something, right? You got really good and you’re teaching other people or you’re building this or doing whatever, right? Then once you’re building, then your team starts to grow. Then you have to step into a new role in your business. And that’s, you know, it’s outside the scope of this specific episode. But that’s where we have to expand our capabilities, if you will, as a business owner. And so this is a big opportunity for so many people. It’s assigning responsibility to people on your team for specific results. And this is where I don’t believe that you assign them the KPIs.
Rather, you jointly come up with agreed upon KPIs. This is where we start to answer the question How do I know if my KPIs are reasonable for my team? What I mean by that is if you assign somebody on your team KPIs that they’re supposed to be hitting that are just way out of the realm of possibility, right?
Like there’s simply no way that the KPIs that you assign them are going to be achieved within the timeframe that you’re asking, What’s that going to do? Like they’re going to work on it, but they know it’s not possible. They’re going to be completely demotivated as they’re doing their work. We don’t want that. That’s why I recommend you jointly come up with the KPIs together with your respective team members. You can set a baseline goal and then if you want to, you can set like a next level up goal and you can look at historical data, right, to help set the goals and the KPIs like, all right, what do we do the last time we did this or, you know, whatever historical data is sort of the best place to to start there.
And obviously you want to be stretching because you might go to somebody on your team and say, all right, I want to grow my list by 3000 people this month. And they’re like, based on the parameters that you’re giving me and the budget and etcetera, etcetera, just making this up, they’re like, I don’t really think that that’s possible.
I think we can do 2000. And so it’s a discussion. You might disagree with them. Maybe you maybe you stay with the 3000 and you share with them why you think it’s possible. Or maybe you meet in the middle and say, okay, let’s do you know how about 2500 and we’ll use 3000 as sort of like our next level goal? And they’re like, Yeah, okay, cool, let’s do that.
Since your team members taking part in the goal setting process, they’re more invested, they’re more motivated because they help set the goal. And most importantly, when you’re having these conversations with your team, give them the context of the goal and the KPIs. Explain why it’s important and how it fits into the overall vision of your business. So many times when we’re assigning projects to our team and so forth, we’re not giving them the context. I’ve done a whole episode about context with your team here on the show previously and the not so distant past. It’s super, super important. It allows them to understand the why.
Like, why is this a project? Why are we working on this? Oh, it fits into the. Oh, I get it now. Okay, cool. I’m on board. Right. And then finally, once you’ve got your KPIs set, make them visible to everybody on your team. Even if people are not responsible for a specific goal or whatever. I like to make them visible for everybody to see. It helps with accountability.
It’s a great way to bring your team together. Rallying around common goals. Et cetera. And you know, then you’re creating a system for tracking the KPIs and for accountability, whether that’s your project management software or a Google sheet, whatever. Just make it as easy as possible to see the KPIs to be able to review and analyze the data. If you have a weekly team meeting, for example, make sure you get as the CEO that you get the completed scorecard, which has the KPIs on it. You know, like, here’s our goal. This is where we’re currently at. Make sure you get that completed scorecard prior to the meeting so that you can review, analyze, ask questions during the meeting, and this helps you course correct if needed.
Remember on that you are not pulling the data. Different people on your team are pulling and inputting the data respectively for what they’re responsible for. You are not pulling the data. You are reviewing the data and analyzing the data. And a couple big things here as I wrap this up, communication is key. You have to be having these conversations with individual team members and your team as a whole, and your team needs to understand as part of your culture that their input, their feedback being willing to share what’s going on and what’s maybe not working is key to achieving these goals through KPIs that you have set. And then finally, and this is where a lot of CEOs we don’t want to hear this, but but again, you know, I went through years of this where it was a real struggle for me.
We’re going from that day to day entrepreneur, as I like to say to the CEO role. Part of that CEO role is coaching our team members, helping them become, you know, the best version of themselves. And also, again, outside the scope of this episode, the best version of themselves, both in the business and outside the business. You’re there to coach them to help them achieve what they’re going after. And yes, if you don’t have an integrator on your team, you are responsible for holding them accountable. Now, that could look like your weekly team meetings. Maybe you have, you know, scrum stand ups, the scrum methodology, very, very high level. Basically, it’s you know, the team is answering three questions, right?
What was accomplished? What are they working on and are there any roadblocks in the way of achieving whatever they’re working on Now? You could do that daily. You can do that a couple times a week, once a week, whatever it might be. There’s different options there. But it’s your job as the CEO. You are responsible if you’re not hitting KPIs, even though somebody else is owning the result. You as the CEO are still responsible for that. And that is a tough pill to swallow for so many of us CEOs that we are responsible for that. It’s our business. It’s our job to make sure that we are helping our team.
We’re not doing it for them. We’re not micromanaging, but we are there as a coach, as a resource to help them along their path, because all of this is an effort to achieve why you’re in business, the vision of your business and what your goals are. In the business. So that, my friend, is how I recommend making your KPIs reasonable, working with your team and the types of different KPIs that you want to be looking at. And as I leave you here, I just want to reiterate one thing. You’re setting KPIs based on the most important aspects of your business. And when it comes down to it, why we’re in business, right? It’s revenue and profit. And yes, absolutely people because we have to be serving them in order for them to stay customers. That’s what it comes down to. That’s why I keep joking.
Like, hey, your Instagram followers is not a you know, it’s not a success metric for most of us for your business, not a key KPI. So I hope this was helpful for you. And again, this is a common question I get a lot. And so I wanted to take this opportunity to share this here with you today. So as always, thank you for listening to today’s episode.
I don’t take your attention lightly, and I appreciate you coming to hang out with me. Hope you got some value today. Until next time, my friend, be well and I’ll chat with you soon.