Do you run a spaghetti business? You know, the kind of business where you throw spaghetti at the wall and see what sticks?

Maybe you try this tactic and that trend, or follow your coach or mentor’s program exactly, but nothing ever seems to get the results you want? Or maybe you have a guilty suspicion that you “pivot” too often, but you justify it because you’re “failing fast.”

This is pretty normal, but that doesn’t mean it’s the best… At a certain point, no one knows 100% FOR SURE what to work on at any given time - which strategy to use, or what area of the business to focus on first - but surely there’s gotta be some way to make an educated guess!

You started tracking some KPIs at the beginning of the year hoping this would help, but you kind of forgot to keep entering the data, so you only have a couple months worth of insights. All the dashboards have all the numbers, but that’s just too confusing. You know this is important to figure out, but you think “I’ll get to it later.”

There’s a lot of opinions about which data is the most important. Probably you’ve seen a lot of numbers thrown around in the community groups of the programs you’re in, but with no context for their businesses, you’re not sure whether those are good or bad and how your business compares. 

All you know for sure is that your programs are selling and you’ve got leads coming in, so it’ll probably work itself out, right?

Well… maybe, maybe not.

It’ll work itself out if you’re comfortable with how things are going right now: with the constant pivoting and second-guessing and wondering if you’ll ever be confident in a decision.

It won’t work itself out if you want a fool-proof rule of thumb to guide your decisions, hard data to compare and benchmark yourself against, and a steady upwards trend in your growth charts.

All the KPIs people track - and all the different metrics in your dashboards - are all trying to tell you the same thing: how you’re doing so you can decide if that’s where you want to be. 

If it’s not where you want to be, it provides a starting point baseline to launch from, and then compare your progress to, to determine if you’re going in the direction you want.

If you’ve randomly adopted KPIs from all of your favorite businesspeople into a smorgasbord of data (LTV-to-CAC, CPC, conversion rates, etc), you’ll never know exactly what you should do at any decision crossroads because a confused mind always says no - including yours ;)

And we accountant/data analyst types can tell you - we can spend hours upon hours making beautiful graphs and charts and custom dashboards, but if it doesn’t immediately tell you what you want to know, you’ll never look at it again.

Word to the wise: don’t waste your valuable time creating a beautiful dashboard for yourself if you don’t know what you want to know or how these numbers will tell it to you.

My private clients and I solve this problem by:

• Identifying the overall goal of their business (you’ve probably already done this a million times: a mission statement, big vision, etc)
• Identifying no more than 4 key performance metrics that directly track progress towards that goal (there’s a few standard ones that benefit everyone, more on that in a sec)
• Pull reports and data from their existing software: accounting & budgeting, merchant accounts, salescart, CRM/ESP, etc
• Analyze the data to get baseline numbers for those 4 KPIs
• Identify the place where they’re feeling the biggest crunch (if they’re just feeling general floundering, usually the P&L can give some insights)
• Brainstorm a few specific actions they can take towards fixing it, prioritize, and set deadlines (I also provide accountability to help them stay focused)
• Review completion of the actions, rerun the reports, and compare the new numbers to the baseline to check progress.

If the numbers are showing a slight move in the right direction, we may double down on the action. Because we’re only tracking one thing and keeping records of the actions taken, we know which action has which result.

Or if it’s been a month or two and we feel like we should have seen more progress by now, we may move to the next action on the list and try that for a while, measuring progress as we go. We do NOT change the focus of the action until it has been “fixed.” 

One key thing to note here is that this takes TIME. You have to commit to trying one thing at a time for enough time to see a difference. Otherwise you have too many variables and it’s impossible to determine with any confidence which action produced which result. 

It’s true that there’s never just ONE thing that solves a problem: it’s usually a combination of several factors. But you’ll only know your custom secret sauce recipe if you measure your ingredients as you go.

THAT’S what KPIs really are: your business’s own custom Secret Sauce.

Once you have the Secret Sauce tasting the way you want, you’ll know EXACTLY which ingredients to adjust to get different results. Want a little more spicy? Punch up your content. Want a little more sweetness? Streamline those ads. Want a deeper, bolder undertone? Cut back on those expenses and build up your savings.   

The basic Secret Sauce recipe that anyone can start with is as follows:

Gross revenue

This is the amount of money you make - the total number BEFORE your sales cart charges you processing fees. Make sure you know where to find this info and that it’s reliable, because all other financial metrics are based on this number.

Margins

For people with physical products and/or payroll, you should focus on operating margin. This is the amount of money left after COGS and wages (and all other payroll-related expenses like workers comp, benefits, payroll software fees, etc). This number tells you how efficient your production systems and employees are. The higher the margin, the better.

For people selling digital products or services, and who have no employees, you should focus on profit margin. This is the amount of money left after expenses. (If you have COGS, they should be negligible… maybe what you pay for your course platform or paying freelance designers, etc). The bulk of your outflow is expenses. The higher your profit margin, the more efficient your business is and the more money you make (also the more taxes you owe, so bear that in mind too).

% of active customers

This will look different depending on your goal; but the general idea is to know the number of people in your audience who take an action compared to the total number of your audience.

For sales-focused goals, track the number of people who have purchased a product vs total audience.

For engagement-focused goals, track the number of people who like, comment, subscribe vs the total number of reach.

The higher the percentage of active customers the better.

% of churn

Again, there can be different metrics tracked for different goals: this measures the amount of people who took a desired action and now are no longer taking that action.

For sales-focused goals, this is the number of refunds, membership cancellations, etc.

For engagement-focused goals, this is the number of unsubscribes, Facebook followers who haven’t engaged in a while, etc

This measures the longevity of your client relationship and the effectiveness of your offer.

Track these 4 things, and you’ll be well on your way to knowing your business better - and making informed decisions you can be reasonably confident about ;)

If you want help determining the exact ingredients for your Secret Sauce, figuring out how to find the numbers to track, tracking them, analyzing the results, and identifying several actions you can take to improve the different areas of your business, consider joining my monthly bookkeeping service 😀

I work 1:1 with private clients to develop these custom frameworks, do the tracking for them, coach them through determining their actions, and provide accountability and celebration for a job well done :D 

>>Click here<< for more information on everything included in the monthly package 🙂