How to Set Goals and KPIs
Aug 26, 2024Today, we delve into a crucial aspect of business development: setting goals and defining key performance indicators (KPIs).
Goal setting and KPIs are often mentioned in the business world, but what do they really mean? More importantly, how can you leverage them to see exponential growth in your business? Firstly, goals need to be specific and measurable. Broad ambitions like "grow the business" aren't enough. Ask yourself, what does growing the business actually look like? Increased revenue, an expanded client base, a larger team, or perhaps a more popular podcast? The more precise you are, the easier it is to monitor progress.
For example, our team outlined several specific objectives: growing the podcast, increasing revenue, expanding our team, and enhancing profitability. Just saying "grow the podcast" isn't enough. We defined what metrics would signify growth, such as the number of new listeners per month or audience engagement levels.
To keep things organized and focused, I recommend dividing your business into distinct dimensions. Our framework breaks these dimensions into the four P's: Promotion (Marketing and Lead Generation), Purchase (Sales), Product (Client Fulfillment), and People (Team). These categories help encompass nearly every facet of a business.
When discussing these dimensions, it's crucial to set specific, actionable goals for each area. For instance, under Sales, our objective was to grow our CFO business by 20%. This goal wasn’t just about revenue; it also involved increasing the average client fee by attracting high-value clients and eventually supplementing our team with a salesperson.
One central tenet when setting KPIs is distinguishing between leading and lagging indicators. Lagging indicators are outcome-based metrics we traditionally focus on, such as closed sales or revenue. While essential, these indicators don't guide you on the steps needed to achieve your goals. Leading indicators are predictive metrics that signal whether you're on track to reach your objectives. Examples include the number of new email subscribers who opted into your sales funnel, the number of sales calls completed, and the quality of client interactions.
Imagine your goal is to increase monthly sales by $10,000. While your lagging indicator is the sales number, your leading indicators might involve the number of potential clients contacted, the click-through rates of your promotional emails, or the engagement in your prospecting events. Tracking these data points allows you to assess whether you're pacing right to meet your sales goal before the actual sales figures come in. For example, knowing your close rate from sales calls can help set a target for the number of calls needed to meet your sales objectives.
For effective implementation of these goals and KPIs, assign clear ownership to team members. Have each team member be responsible for specific metrics and make them present their progress in regular meetings. This strategy fosters accountability and ensures everyone is focused on achieving aligned objectives. Moreover, tie these KPIs to incentives, but be wary of unintended consequences. For instance, a sales team focused purely on closing rates might ignore nurturing customer relationships for long-term value. Creating balanced incentives helps align team behavior and business goals.
Goal setting and KPIs are indeed the backbone of strategic business growth. They help translate abstract aspirations into actionable steps and measurable outcomes. By breaking down your business into specific dimensions and focusing on both leading and lagging indicators, you can pave a clearer path to success. Doing this not only keeps your team aligned and motivated but also ensures every action taken is a step toward achieving your broader business goals.
What you'll hear in this episode:
05:37 Set goals, measure outcomes using KPIs.
07:50 Set clear goals, measure and address constraints.
11:02 Define leading and lagging indicators for goals..
If you like this episode, check out:
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