You Can’t Scale What You Can’t Measure

27 June, 2019
Bean Ninjas

Bean Ninjas

6 minutes

Peter Drucker, the father of modern business management, once said:

“If you can’t measure it, you can’t manage it.”

Basically, this means you can’t improve something you can’t track. Imagine training yourself to run farther without tracking distance, or trying to improve your golf game without keeping score. You would never know whether you’ve improved or how to push yourself to grow.

When your business is small, it’s easy to keep your finger on the company’s pulse because there just isn’t much to remember. You know, for example, how many leads are in the pipeline because there are only three of them. But what happens when there are dozens or hundreds of leads in your pipe?

In order to scale, you need to identify and track the individual metrics that stimulate growth.

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Better Data = Better Decisions

person looking at computer reports

Good data helps you make impactful decisions to grow your business. It helps you identify the tiny optimizations that create the most value.

Your first step is to decide which key performance indicators (KPIs) lead to growth. These are sometimes called growth levers because you can stimulate growth by pushing on them.

How do you find your key metrics? By starting with your goals.

In order to scale, track the individual metrics that stimulate growth. Share on X

For instance, if you’re an IT security consultant, you might make money every time you review a business and make security recommendations. So your goal is to complete projects as quickly as possible so you can move on the next.

Your KPI, in this example, would be the length of time to complete each project. You can push on this KPI in several different ways (e.g., systematizing your work, implementing new technology, or hiring help).

Another KPI might be the value of each project. You can push on this KPI by upselling additional products and services or raising your rate.

Resist the urge to measure everything that’s measurable because most of it has little impact on your business. The number of people who like your Facebook page is a vanity metric. It’s nice to know, but it probably doesn’t drive sales, so it’s not a key performance indicator.

If you choose the right key performance indicators and learn what affects them, you’ll be in a great position to scale. Companies that intend to scale massively spend a lot of time and money discovering their KPIs and how to influence them so they can pour resources into the most impactful techniques.

I’ll use Bean Ninjas as an example to give you a better idea of the relationship between metrics and good decision making. We base most of our decision-making on three KPIs:

KPI #1: Total monthly recurring revenue

The first KPI is our most important. We do some one-off jobs and training, but the majority of our revenue comes through our monthly bookkeeping subscription service. The amount of subscription revenue we generate every month is the best indicator of our company’s performance.

How we use this KPI: We add new customers using outbound and inbound sales processes. We retain customers by doing great work and continually learning about our customers and what they want. For instance, we know our customers want to work with bookkeepers who are easy to communicate with and provide financial reports quickly after the end of each month. By understanding what our customers want and delivering on this, we can minimize churn. A combination of low churn and achieving our monthly sales targets help us to hit our MRR goals.  

KPI #2: Average monthly recurring revenue per customer

We offer several packages and add-on services, so the amount our customers spend with us can vary. As businesses grow their bookkeeping and accounting needs increase.

We aim to proactively offer additional services when we feel the benefit to the client outweighs the cost.  For example, as a business grows they will benefit from moving from cash accounting to accrual accounting to provide more accurate reports.

How we use this KPI: We have an internal road map which helps us to determine when each of our clients would benefit from an additional service. We also track our average spend per customer on a weekly basis.

KPI #3: Project deliverability

This metric tracks the speed with which we complete work for our customers. Since our customers want their financial data recorded quickly and reported on a timely basis, this metric is an overall indicator of the quality of our service.

How we use this KPI: In the past, we’ve had trouble finding an efficient way of tracking this metric and have used a spreadsheet. But we’re in the process of moving to Wrike, a project management system, which will give us valuable data and reporting on our performance. We’ll be able to run a range of reports on completion times for our whole business and within different teams.

Data Accessibility

person looking at reports

Once you know which numbers are important to your business, you have to make them part of your daily operations. If you never think about or address your KPIs, you can’t use them to grow.

We recommend two ways to keep your KPIs visible and accessible.

1. Create Custom Dashboards

Essentially, a dashboard is a centralized place that shows your most important data. Think of the dashboard in a car. It displays critical information in an accessible place so you can access it quickly to make fast, repeated decisions.

You can set up the dashboard to aggregate your key metrics. Tools like Baremetrics or GeckoBoard pull data from your other tools to help you organize and visualize data.

Once you set up your dashboard to aggregate your KPIs (and any secondary metrics you find valuable for your day-to-day decisions), you won’t have to change it much unless you decide to track different KPIs.

Admittedly, we don’t use a general dashboard to collect our KPIs right now. But that’s because two of our important metrics come from our financial management tool (Xero) and the third (work deliverability) has always been hard to track. Like I mentioned earlier, we’re in the process of implementing a new project management tool so we can measure deliverability.

2. Host Regular Meetings/Updates to Discuss Your Metrics

Our head of sales records a weekly video for our our entire team where he shares an update on how we are tracking against two of our KPIs: Monthly recurring revenue and average monthly recurring revenue per customer. We report on some other numbers as well, but those are our most important (because we know they lead to growth), so they get most of our attention.

During the video, Wayne explains why those numbers look the way they do, what we did to affect them over the week, and how we can improve them for next week. If we learn anything actionable, we look for ways to incorporate that advice into our overall process and individual procedures.

We also try to put those numbers in the context of months and years so we can see longer trends. This way we don’t panic over slight dips if there’s still a clear upward trend.Updates like these are an important way to keep your KPIs at the forefront of your operations because it includes your team in the discussion about your business’ growth levers.

Insights Behind Your Data

Having data at your fingertips isn’t enough. It’s also important to understand the data’s underlying reasoning. That is, for every metric you track, you should be able to answer “Why is it like that?” This is called insight.

For example, if you measure customer satisfaction by the number of support tickets your customers submit, a sudden explosion of tickets would alarm you, but it doesn’t tell you how to respond. After asking yourself “Why?” you might learn that your help documentation crashed, so customers were forced to open tickets.

Fixing the documentation would address the change in your metrics. The data told you what happened, but you still had to discover why it happened.

This is especially important if you use outsourcers to manage different pieces of your business. For instance, an ecommerce store that outsources email marketing shouldn’t be satisfied to see “15% open rate” on a report. The outsourcer should be able to explain why it’s higher or lower than similar stores, and what steps will influence that metric. If they can’t explain it themselves, their outsourcing partner should help them understand it.

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When it comes to growing your business, you can’t drive change unless you can measure the results. You’ll need to identify the key performance indicators and learn how to push them. Then you’ll have the tools to scale your business!

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Bean Ninjas

Bean Ninjas

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