I wanted to share with you a discovery I made while coaching business owners. It’s not revolutionary, but it did influence my redirection toward using KPIs (key performance indicators) as a crucial function of leadership coaching.
The discovery: they need focus.
Their CFOs and executive teams (for those owners who have them) are likely to generate data but rely on the top executive to create the focus. Owners are often left with dozens of dashboards, hundreds of metrics and the stress to determine what the business needs to do to succeed.
Owners who don’t have large teams or teams generating that data still face the same problem.
To help my clients, I researched OKRs (objective, key results), KPIs, SMART goals and other popular tools that help bring focus. Those tools, however, didn’t tell them what to focus on; rather they just provided a structure for execution of the focus.
That’s why I switched to KPIs.
KPIs are clear and measurable and open up a world of coaching needs for you.
Here’s an example that I like to use often: a KPI for concentration of revenue. To be world-class, a company should have no more than 20 percent of their revenue concentrated in one source, such as distributors, licensing deals, or a single client. Lots of benefits come from hitting that world-class target including higher valuations and lowering borrowing costs.
Most companies, however, are above that target.
When you show the owner where they need to be to get the highest exit values, lower costs of borrowing, and higher retention rates and then compare that target to where they are currently, you just created a clear need for your services.
Let’s unpack this.
Let’s say your prospect has 35 percent of their revenue from one source. You show them that world-class is 20 percent. They have a 15-point gap they need to close. You will be the one to help close it.
- Why does that gap exist?
- Who is running sales?
- What is their background?
- Where is their focus?
- What are their accountabilities?
- Do they need leadership training?
Often, companies become focused on servicing the biggest account and extracting as much revenue from it as possible. It’s the easiest path, but not the best.
I hope your mind is racing at this point, because it should be. The possibilities for you to sell several of your services to this prospect are endless. More importantly, for the prospect, there is a clear reason why they need you with clear, immutable and defensible benefits.
Achieving this one KPI alone added $35 million in valuation to one of our clients.
Here’s to being world-class,
Peter
Founder, Catipult