It seems that despite the current global economy, more and more businesses are being created each year (the US now has 27 million entrepreneurs), each with their own purpose and goal.
One of the things that’s making it so easy to set up a business is the number of cloud applications available, with it being possible to set up and run an entire business from your bedroom or on your travels.
But with most businesses using around 16 cloud applications to manage the day-to-day running, we have a huge amount of data to play with.
While that comes with a lot of bonuses, it often just leaves us feeling extremely overwhelmed and not knowing quite where you’re supposed to be going or doing.
That’s why having a business goal is so important. Choosing a goal and sticking with it tells you what data you should be focusing on, and gives you the motivation to keep going.
As you read this, it’s probably made you think of your own business goal; it could be as simple as hitting $1 million in revenue or something slightly more intangible like becoming an influencer in your industry.
If that’s the case, you’ve done the easy part. If you’re not sure what your goal is, take some advice from Avinash Kaushik and ask yourself “What’s the point of your business?”.
The hard part is identifying the KPIs that will help you track this goal and using them to know where to turn next. But that of course, is why you’re reading isn’t it?
In this post, we’ll be covering how to create a SMART goal for your business that you can actually achieve and which metrics you should measure for one of the most important business goals – Increase Revenue.
Click here to get the PDF version with 3 other goals that you should be tracking for your business too.
Doing the SMART thing
Before we delve into each goal, let’s talk a little bit about how to make sure your goal is a good one.
One of the first problems with the goals that we’ll be looking at is that they are very high level.
Increase revenue doesn’t really tell us a whole lot about what we want to achieve for our business – what do we want to increase our revenue to, and how are we going to achieve that?
Using the SMART criteria, we can pinpoint exactly how we’ll achieve that, which transforms them into ‘smarter’ and more useful goals.
The SMART criteria (Specific, Measurable, Assignable, Realistic, Time-Related) has been around for many years, and while many have slightly differing versions of it, the main message remains the same.
To find out what makes a goal SMART let’s take a look at a good example:
I want to increase revenue to $10,000/week within 60 days with a weekly growth of 14%. (sumo me image style)
So what makes this goal SMART?
If your goal is vague, you might as well not have one, after all how will you know if you’ve succeeded?
‘Increase Revenue’ as a goal doesn’t mean a whole lot on its own. Technically, if you increase your revenue by $1 you’ve succeeded. Technically, being the key word here.
But you haven’t really succeeded with anything, in fact you haven’t even made enough money to buy a dinner!
The smart goal listed above is much more specific because we’ve actually gone into detail about how much we want to increase the revenue to – $10,000 a week to be precise.
Being specific is as simple as setting ourselves a target which we can measure our success by. Which leads us to the next phrase in the acronym…
In order to understand how you’re going to achieve your goal, you need to make it measurable.
We’ve already made our goal measurable by setting ourselves a target. But we improve on this even more by breaking it down each week.
If you know how much you need to increase your revenue by each week, you’ll be able to see if you’re on track.
In our goal, we know that currently we’re hitting $3,460 in revenue each week. In order to get that to $10,000 we need to increase that by $6,540 dollars.
That sounds a little scary at first right?
However, we can break this down to be easily measured week to week. We can work out that to reach $10,000 within 60 days, we need to grow our revenue by 14% week on week.
That means that in the first week, we only need to add an extra $500 revenue to be on track. Depending on your business, that could be the equivalent of just one order. Suddenly it seems a little easier to reach!
This step also refers to the KPIs that you’ll use to measure your goal by. Having the right KPI is essential (as you know), and tracking the right one will make sure you’re measuring your success correctly.
Assignable / Actionable
This is the letter in the acronym that can sometimes have a completely different meaning depending on who you talk to. I like to use one of these two keywords however.
Making your goal assignable does exactly what it says on the tin – you need to identify who will be responsible for achieving this goal. Whether it’s one person or a team, having a clear assignment means there’s no confusion over who’s accountable for the success or failure of this goal.
I like to use the word actionable just as a reminder that in order to achieve this goal, you need to actually put the work in. Setting goals is a pointless exercise if you don’t have the drive to make it work.
This also refers to choosing the KPIs that you’ll use to measure your goal. If these KPIs don’t provide you with information that you can act upon, you’ll struggle to hit your target.
Can you actually achieve this goal? Do you have the team and resources needed to do this?
Key to this step is creating a detailed plan that will allow you to figure out 1) if it’s possible and 2) how you’re going to do it.
I highly recommend using one of the many Sumo Me Guides if you’re struggling to pull together a plan.
The last element is all about setting yourself a deadline. If you don’t have an ending in sight, it’s difficult to identify successes or failure.
We want to increase our revenue to $10,000 but if we don’t achieve that within the next 60 days, we’ll just shrug our shoulders and continue soldiering on forevermore. We’re not properly identifying what isn’t working, because we’ll most likely give the excuse of – “just give it a little longer to work”.
Instead, by saying we want to achieve this within 60 days, we’re giving ourselves a deadline to work to and milestones within.
If we hit the halfway point and we’re still only generating $4,500 worth of revenue a week, we know that we need to revisit our strategy.
BONUS TIP: I personally believe that one of the biggest reasons entrepreneurs don’t set goals that are time-related is because of the fear of failure.
By not setting a time frame, you’re allowing yourself to extend your failure until it magically starts working.
Don’t do this.
Instead, share your goal with someone who will hold you accountable. It could be your boss, a colleague, a family member or a friend. If you don’t want to share it with someone, write it on a post-it note and stick it somewhere highly visible to you day to day.
Doing so will give you the drive to make sure you don’t fail.
Click here to get the PDF.
Quant based Marketing
As we’ve just covered, part of creating your SMART goal is to figure out how realistic it is and how you’ll measure it. During my explanation you’ll already have seen just how I did some of that working out and it’s using quant based marketing.
It’s a strategy touted by Noah Kagan, (read more about it here), which focuses on working backwards from your goal to figure out your solution.
Let’s go back to our original SMART goal and to give a little more context, here’s some background to our ‘business’:
- They’re making $180,000 in revenue a year
- They want to reach $520,000 in revenue a year.
- It’s currently October and they want to achieve this goal before the end of the year
A year is a long time frame, so we’ll first break it down into a much more manageable time frame – weeks. This leaves us with a current revenue of approximately $3,460 / week and a target of $10,000 / week.
In order to reach this goal, we need to create an additional $6,540 revenue every week.
There are only two full months left of the year so we’re going to set a time frame of 60 days.
Obviously we’re not going to suddenly start making an extra $6,540 out of nowhere. We’ll be putting a strategy in place that will steadily grow our revenue week on week.
What we need to do is work out by how much that we’ll need to grow in order to reach our target within that time frame.
To do that, you’ll need your current revenue, your target revenue and the time period you want to reach it in, you’ll then need this formula:
(Target revenue / Current revenue) ^ (1/time frame) – 1
Though it looks complicated, it’s really not that difficult, let’s break it down.
Target Revenue = $10,000
Current Revenue = $3460
Time Frame = 8 weeks (there’s approximately 8 weeks in 60 days).
So our formula looks a little like this:
((10,000 / 3460) ^ 0.125) – 1
Multiply your answer by 100 to get your percentage.
To make it even easier, if you’re using a spreadsheet like Excel or Google Drive, here’s the formula you need to do it all for you:
So based on that formula we know that in order to reach $10,000 / week by the end of that 60 days, we’ll need to grow our current revenue by 14% each week.
That leaves us with our goal:
“I want to increase revenue to $10,000 / week within 60 days with 14% weekly growth.”
I’m no maths expert, but it turns out it’s not that difficult to work out.
From there it’s a case of working back again and setting weekly targets for each tactic that you’ll use to reach your goal (e.g. referral traffic to generate $4,000, organic to generate $3,000 and so on).
This applies to any goal that you’re planning on setting up, so even if you started off with a really vague goal of ‘become an influencer’ you can break it down to ‘become an influencer by getting 5,000 email subscribers’.
So now that you know how to identify and plan for SMART, quant based goals – let’s dig into the KPIs you need for 4 of the most common goals out there.
So let’s get into our goal. Money makes the world go round they say, so increasing your revenue to get to a place that your business is comfortable at is important.
The KPI and metrics you need:
- Transactions / Orders
- Average Order Value
- Conversion Rate
We already created a SMART goal for this one earlier in the post, so let’s just take another look at it to refresh our memory.
“I want to increase revenue to $10,000/week within 60 days with a weekly growth of 14%.”
So far, so good.
With each goal, there will undoubtedly be one KPI that seems extremely obvious, likely because it’s mentioned in the goal itself.
Here that metric is revenue.
It’s this KPI and that KPI alone that will allow you to determine your success after the 60 days. It really is that simple.
We’re not leaving it there however, as one way to make your KPIs even more powerful is through the use of segmentation.
By using segmentation, you can pinpoint what’s working and stop doing what isn’t.
This could be revenue per channel, per device, per user type or per product. Each of those segments will help you to narrow down and optimise the strategies that are working for you.
Here’s an example:
Looking at our channel breakdown, we can clearly see which channels are working for us and which aren’t.
We might look at our Paid channel and realise that we’re actually spending more than we’re making, and as such need to reassess our strategy.
There are 4 other metrics I’d use to provide context and support your revenue KPI:
- Average Order Value
- Conversion Rate
Using a combination of these metrics and segmentation, you’ll be able to identify which strategies you need to focus on in order to hit your revenue target.
Here’s how we can work it out, using the business we previously mentioned.
Here’s our current stats:
Average Order Value = $69.20
Conversion Rate = 1.5%
No. of Orders = 50/week
Sessions = 3,330/week
We think that our average order value is unlikely to increase due to our current product range (though this might differ for your business) so in order to hit $10,000 revenue a week, we need a minimum of 145 orders per week.
Looking at our current traffic, that means we have two options:
- Focus on increasing conversion rate to 4.3% based on current sessions OR,
- Focus on increasing traffic to 9,504 based on current conversion rate.
We might even realise that we need to increase the conversion rate for specific channels more so than others.
And this is where it gets clever.
By using these metrics to provide context to how we’re currently generating revenue, we’ve actually identified two new goals for our business.
This then means that we can get really specific with our growth strategies, and in turn see actual results that impact our bottom line.
Click here to get the PDF