Use performance management to track your progress and make better decisions, so you can improve your execution and scale your startup faster.
As your startup grows, so does the need to take the ‘controlled chaos’ that got you this far and replace it with a more structured approach to planning and execution.
If you don’t make this transition, you’ll find that managing a growing number of clients and team members becomes more difficult and eventually leads to further chaos, poor execution, and bad decisions.
Introduce performance management: the process of collecting sales and marketing data, evaluating your results, and using these insights to make better, data-driven decisions.
For entrepreneurs who are inherently intuitive decision-makers, this more defined approach presents a huge challenge.
They may feel that introducing too much structure smothers creativity.
In fact, the opposite is true.
Founders who embrace performance management free up their organization to innovate.
All the energy they would normally expend on trying to figure out what is working and what is not, is channeled into doing more of the right things, more often.
In this guide, I share my 3-step performance management framework for tracking your sales and marketing performance and making better decisions based on data, so you accelerate your startup’s growth.
PERFORMANCE MANAGEMENT BEGINS WITH KNOWING WHAT TO TRACK
An effective performance management system is built on three pillars:
- Define what you will track
- Determine how you will track it
- Decide how you will use this information
Let’s look at each element in more detail.
1. Track your financial results
As part of an effective planning process, you set financial goals: revenues, costs, profit/loss and profit margin.
(Check out my 5-step process guaranteed to help you hit your goals HERE.)
You must track how you are performing against these same four parameters to see how effectively you are moving towards reaching your goals.
First, use a spreadsheet to break these parameters down into further detail, reaching a level appropriate to your stage of development and available time and resources.
For example, you may breakdown revenues by month, product or service type, customer or region.
You can breakdown expenses by month, major categories (e.g., office rent, advertising, salaries), or even down to the individual invoice level.
Make sure to add columns that compare your actual performance versus your specific target, as well as versus the previous year.
This way you can see how far you have to go to reach your target and whether or not your business is in growth or in decline.
You should input this data on an ongoing, usually monthly basis so you discover any gaps versus your targets as early as possible.
Over time, you will discover patterns and trend in your business, and will be able to make the necessary adjustments to get back on track, if needed.
Don’t feel compelled to go into extreme detail right away.
Instead, start by setting and tracking just a few financial targets – e.g., total monthly revenues, costs and profit/loss – and evaluating your performance versus these limited number of objectives.
As you progress, you’ll find yourself wondering why you’re falling short on revenues or exceeding costs, and you’ll want go one-level ‘deeper’ in your analysis.
The more details you follow, the easier it will be for you to spot trends and make better decisions.
2. Track performance versus goals and KPIs
When creating a Simple Plan, as outlined in my blog, you followed this process:
- First, you set focus areas for product, sale and marketing and organization.
- Then, you set 1-to-3 goals for each focus area.
- Finally, you set key performance indicators, or KPIs, for each goal.
Remember: a goal is the outcome you hope to achieve. A KPI is a metric to let you know how well you’re doing as you progress towards your goal.
As part of your performance management system, you should track how you are doing versus your goals and KPIs.
This is why it’s so important that you make your goals and KPIs measurable when you first set them.
When it comes time to evaluate whether you have achieved your goal, you will be able to make a ‘yes or no’ assessment easily.
Goals tied to sales and marketing performance – e.g., the number of deals or customers, the average revenue per deal, or inventory usage level – are the easiest to measure.
Check out my blog to learn how to make ‘softer goals’ – like strategic alignment, product quality, or sales satisfaction – measurable, as well.
3. Track your operational KPIs
As part of the planning process, you will have set KPIs linked to your business goals as detailed above.
There are some KPIs, however, that may not be explicitly stated in your goals, but are worth tracking anyway to you can see how you’re progressing in these areas over time.
I call these operational KPIs, because they give you an indication of how your business is operating.
As you track operational KPIs, you will identify areas for improvement and can make changes based on this data.
Here are some typical sales and marketing related operational KPIs that may be worth tracking.
1. Sales related operational KPIs
- Monthly recurring revenue (MRR)
- Revenue growth rate (%)
- Average revenue per user (ARPU)
- Average contract value (ACV)
- Average price or rate
- Customer lifetime value (CLV)
- Lead conversion rate (%)
- Customer renewal rate (%)
2. Marketing related operational KPIs
- Customer acquisition cost (CAC)
- Marketing qualified Leads
- Website visitors/Traffic
- Advertising effectiveness
- Social media engagement
Some of these operational KPIs will be relevant for your business, while others may not.
Whatever you do, don’t let KPIs become TMI (too much information)!
You’re better off tracking 3-to-5 operational KPIs properly and consistently, then tracking 25-30 KPIs erratically, and losing focus on what metrics really matter.
4. Track performance versus your action plan
As part of your Simple Plan, you created an action plan that gives you the guidelines necessary to achieve your goals and track your progress.
In practice, it breaks down your path toward each goal into individual steps.
Revisit your Gantt Chart to see how you’re doing versus your plan.
Cross out or add new actions as you review your progress, and adjust deadlines as needed, as it’s likely that some things are progressing more slowly than expected.
The last thing you want to do is miss an important deadline because you were not clear on where you stood at any given moment.
HOW TO MEASURE YOUR PERFORMANCE SO YOU STAY ON TRACK
Now that you’re clear on what performance-related information you should track, make sure you understand how to track this information, so can put the data you gather to good use.
To apply these techniques, you don’t need to be a financial wizard, but you must have a basic understanding of how to use a spreadsheet, like Excel.
If you don’t have this skill, you should either get training or appoint someone who can create some spreadsheet templates for you.
Let’s look at two important areas to track, separately.
1. Financials & KPIs
Create a ‘management dashboard’ that summarizes all the critical information about your financial performance and progress versus KPIs in one place.
First, create a series of individual sheets inside an Excel workbook – one each for revenues, expenses and sale and marketing KPIs.
Track data for each category of information on the individual sheets on a regular, usually monthly, basis.
Then, create a single ‘summary sheet’ that collects the topline results for each sheet into a single management summary.
Make sure you include only the most critical data in this summary sheet – e.g., total monthly revenues, expenses, profit, leads, conversion rates – so that it’s easy to review and understand.
As you collect and review these results regularly, you’ll discover patterns – e.g., a steady decline in the number of leads, a regular growth in monthly revenues – that will help you identify areas of acknowledgement or improvement.
2. Goals and actions
Set aside an hour at the start of end of each week or month to track your performance against your goals and actions and determine how you are doing in each area.
Take note of the areas where you are making satisfactory progress, and dive deeper into areas where you are not progressing quite as well.
Once you’ve identified the areas for improvement, create a ‘mini action plan’ to address these areas in more detail and take immediate action to turn things around.
Over time, this process will be less formal – as is the case with tracking performance versus financial targets and KPIs – and more fluid as you get into the habit of addressing problems on an ongoing basis and taking immediate action to fix them.
HOW TO USE PERFORMANCE INFORMATION TO ACCELERATE YOUR BUSINESS GROWTH
With all this valuable information at your disposal, you must now decide how to use it to help accelerate the growth of your business.
As a basic principle, use the information you gather to constantly evaluate your progress and make better, data-driven decisions.
There’s more you can do.
1. Share progress with your team
Share your results with your co-founders or broader team, so they are aware of how the business is performing and progressing towards your goals.
You can do so in a variety of forums, depending on the size of your organization.
These performance management forums include:
- Daily stand-up – a quick, 15-minute meeting at the start of each workday.
- Management meeting – a weekly or biweekly meeting of the company’s senior leadership team.
- “All hands” meetings – a monthly or quarterly meeting of the entire company.
- Performance reviews – a quarterly, semi-annual, or annual 1-on-1 review of an individual’s performance versus their individual goals and KPIs.
2. Acknowledge, praise or fix
When evaluating your progress by yourself or with your broader team, use the information you gather to do one or more of these three things:
1. Acknowledge the results as facts
Present the data as an objective set of facts.
There is no benefit to ‘sugar-coating’ the results so they appear better than they really are, or to declaring a Doomsday scenario when in fact, everything seems to be on track.
Simply acknowledge the fact that these results collectively represent a ‘snapshot’ of where your business stands at this moment.
2. Praise and give thanks
If you are on track to reaching your financial targets, goals and KPIs – or some portion of each – take the time to praise anyone who has contributed to these results and thank them for their efforts.
This also includes giving yourself a pat on the back, if you are a solopreneur or manage a small team.
Taking the time to acknowledge a job well done is of great value to you and to the people who support your business.
3. Fix what is broken
If you are not on track to reaching your goals, then don’t spend too much time worrying about the results so far.
Instead, focus your energy on determining the potential source of problems and adjust your action plan to ‘fill the gap’ between where you are and where you want to be.
If the solution requires you to put more effort into lead generation, adjust your allocation of resources or cut costs, then just do it!
If needed, reset your goals.
Be careful, however, not do this too soon.
If you find yourself coming up short or overperforming, it may be just a matter of time before the circumstances change.
Things can take a positive or negative turn quickly so be careful that you don’t overreact by revising your goals too quickly.
EFFECTIVE PERFORMANCE MANAGEMENT TAKES TIME AND COMMITMENT
Keep in mind that introducing an effective performance management process takes time.
Start with doing the basic things well and adding new layers of detail as your become more comfortable with performance management principles and see the first benefits of this approach.
Develop the habit of tracking results regularly, so it becomes an integral part of running your business and not an unnecessary burden on your limited time and resources.
Finally, resist the temptation of making decisions based on ‘gut feeling’ alone, and rely instead on the data you gather to point in the right direction.
Eventually, you will find that your business will become a well-oiled machine that will grow and expand along with the quality of your performance management system.
Want to introduce a performance management system, so you make better decisions and scale your startup faster?
Apply to work with me and I’ll personally take you through The Launch Code in just 8 weeks.
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focusing your offer and message, building a structured sales model, and executing based on targets.
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