Key performance indicators or KPIs are not optional. There are no publicly traded companies that can run without KPIs. Every division in every major company runs on a KPI. No matter what business you’re in, if you’re running even under $100 million but you’re probably still waking up in the morning and saying to yourself, “How do we increase revenue and how do we decrease expenses?” you need to do a simple four-point test.
Learn the four-point test you can do to help you generate leads. The bottom line is yellow is not green, meaning green is cash and yellow and red is not and will never turn into green long-term. Most people confuse activity with accomplishment. At some point you have to get systems in place and there is no better way to run systems than to set up some KPI.
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Yellow Is Not Green
I’m titling this podcast Yellow is Not Green. This podcast is a little bit about what are called KPIs, Key Performance Indicators. I had to mature quite a bit before accepting that KPIs are not optional. I fought them for at least twenty years. I dabbled with them for a few years and we are Full Tilt Boogie with KPIs across the board. I want to give you an example of what is a KPI. What could be a Key Performance Indicator for any company? I’m going to use our company as an example. We build, buy, manage and work with money-making websites.
One of the ways that Google recognizes a quality website is if other websites have mentioned a website. For example, if we were to build a medical site and I was able to get WebMD, the largest medical site in the world, to make a mention of us in their tools and resource section, the spiders of Google would notice that WebMD trusted us, mentioned us and there was a live link pointing from WebMD in which if you clicked on that link under tools and resources, it opened up our medical site. That is considered a backlink.
The way Google works, a major portion of their algorithm that determines if a site should show up above a competitive site is how many backlinks support a site. Some industries, you need to make sure that you have two or three backlinks coming in every month because that’s standard in the industry. Some industries you need ten, some need 30 and some need 50. I think WebMD, in references alone are getting 500 to 800 links a month naturally. If I was to purchase a website and set a marketing plan for that website, I would first want to find out in this industry, in this space of an average size to the one I just bought, how many backlinks do they average each month?
Let’s just use a round number and say it’s twelve. What I’m going to know right now before I buy the website is if the average in this industry is twelve and I open up the website in the backend, I can do some digging and poking and see, “This website only averages six links a month.” I know right now I can have the marketing team build twelve links a month. Double the amount of backlinks and I’m going to grow in rankings, I’m going to grow in traffic and I’m going to grow in revenue with that site.
I’m going to set a Key Performance Indicator of twelve links a month with our marketing team. The old Ken in the ‘90s or early 2000’s, I would have a meeting with a marketer on our team or outside of our team and I would say, “I would like you to have 72 links in the next six months. Go.” They would start their work and they would try to average twelve links a month. What would happen to me countless times over and over is that I would end up meeting with this individual about a week after the six months.
Into my shock I would be told, “We had some challenges. We only ended up getting 30 links.” I would scratch my head and say, “I really wish I would’ve known this earlier because I was always wondering how come this site wasn’t growing as fast as we expected?” What I learned in my big boy phase that publicly traded companies can’t possibly run without KPIs on the upper management level and then KPIs down to the literal feet on the street. The people doing the meaningful work, every division in every major company runs on a KPI.There are no publicly traded companies that can run without KPIs. Click To Tweet
Every one-person shop, every ten-person company, every 115-employee company like ours needs to run with some fundamental KPIs. Let me give you an example of the old Ken versus the new Ken of now. If I was to buy a website for a site partner and determine that it currently was averaging six or nine links a month, I would quickly write a plan that outside of content changing, I would also set a KPI for twelve links a month for six months. You’ve got to go at least six months to give Google a chance to let the dust settle on where twelve links a month should put that site.
The new Ken would have a meeting with this individual and say, “We’re looking for 72 links in six months. We’re looking for twelve links in 30 days, but most importantly we’re looking for three links per week. We’re setting a KPI for three links per week. We’re going to do this KPI with either a simple email, simple Excel spreadsheet, a simple shared Word doc or a shared folder.
In some way, shape or form, there is going to be an every-Friday touch between the marketer and Ken. This touch is going to come with a word and a color. If three or more links were built that week by the end of business Friday, Ken is going to receive a simple shared document of some kind. It’s going to say Week One and it’s simply going to read three, the right of it is going to be turned green. In our KPIs set up front, three or more links that week is green. If two links were built that week, it is going to say two in the box to the right of the number two would be yellow.
If one or less links, meaning zero or one were built, it would read one, the box to the right would be red. What would happen is, Ken would get an email or a text that says, “Check your shared doc.” He would open it up and let’s say the first week was two yellow. I wouldn’t think too much about it. It takes some time to get these things going. Week Two yellow again. I wouldn’t think too much. It takes some time to get things going, but let’s just say hypothetically, the third week said one red.
If in the fourth week I did not see a green, it means they finally get their legs underneath them. They finally got their systems built for this site. I’ll give them another shot. If I don’t see a couple of consecutive greens, I know right now there is an issue with either the website, people do not want to link to it or in most likely what the case is, it’s a human error situation. There’s not enough manpower to build enough quality references or mentions. Ken knows as the manager, he probably did not either train or equip the team doing the work.
Unlike the Ken of the old days where Ken would wait six months to find this information out, the KPIs specifically the color codes showed immediately, this is destined to fail. On the flip side, had Ken opened four consecutive green, I know right now this on time, it’s on track. The manpower is perfect. It doesn’t need any more. I’m just now managing colors. I’m no longer managing people. You could even say I’m managing numbers. I’m not managing people. I did a podcast on Managing Numbers, Not People.
Let’s flip this into something that’s much more familiar to everybody overall company marketing. I don’t care what business you’re in, if you’re running even under $100 million but you’re probably still waking up in the morning and saying to yourself, “How do we increase revenue and how do we decrease expenses?” Let’s just say I was consulting a small to medium-sized company and we wanted to do some test marketing, specifically training on flipping a management into a KPI model. I would do a very simple four-point test and it goes like this.
I would say to the individual or the management team that we’re consulting, I would say, “Give me four platforms that if I personally provided the budget, not your budget, not your operating capital but I put up say $500 a week. What four platforms do you think might help you generate leads?” I was thinking of a person that I had consulted a little bit ago and they said, “Radio, Facebook ads, pay-per-click in Google and affiliate payouts.” “If I ponied up $500 a week for radio, $500 a week for Facebook ads, $500 a week for pay-per-click and $500 a week for affiliate payouts, you think there’s a chance you’d get one to three leads a week from those platforms?” They said, “Yeah. We don’t know. We’ve never tried but we do believe we have talked about those as potential options.”
I said, “Rank these in order of which ones do you think would perform the most?” They said, “Our guess would be Facebook ads, followed by pay-per-click, followed by radio, and followed by affiliate payouts.” Here’s good news and bad news. Bad News is, I’m not paying for your marketing, but the good news is I know where you guys were at financially and I know you can do at least a $100 a week in these four. In radio, you’d get billed monthly, but they could do something in some smaller channels on some smaller stations. The point is they could do it. When you’re doing marketing, you want two different KPIs running at the same time. The first KPI in marketing is called a Use KPI. If we’re going to put $500 a week to use, the first KPI is, was the $500 absorbed and used up?
If you know radio, sometimes they’ll take your $500 but then give you a report the next week. You only ran eight out of nine times, we only used $440. Then that would be a red because it wasn’t %500 or more. If it was $500 or more used, it would be green. You have to be very clear with the numeric directives under the KPIs because you need the data. If the money was used and it’s a yes or no, $500 or more or nothing is green and $499 is red. You’d need a virtual assistant or yourself or somebody to make a simple Excel spreadsheet with the weekending date of Friday and then call the radio company and say, “Yes or No, $500 was absorbed.” Anything under $499 used is a no and they’d say, “Yes, it was.”
The second KPI, you would do that for Facebook. Now, Facebook is another thing, pay-per-click is another thing. You might put up a budget of $500, but it might only use $470, $ 430. The reason you need a Use KPI is over time you’ll start to realize, “In these types of platforms for us to use $500 or more, we have to put in $550 to $600, knowing they’re only going to use say, 85% to 90%.” The first KPI in marketing is a use budget and it can also be a use budget of manpower. It could be two people. Let’s say you have two people that are door-to-door commission-only sales reps. That’s a use. You either had two people knocking on doors that week or you didn’t. Two is a yes, one or less is a no. Over time you’ll know, two’s not getting us the number, we need to hire a third commission only doorknocker. There’s got to be a use budget first in manpower or cash.
The second one is where you would go into your website and in your contact form you would create four drop-down menus. You would not allow a lead to come into your company without an asterisk, meaning a mandatory field next to lead source. It simply says, “How did you hear of us?” They don’t have to think, they don’t have to type and they can either pick radio, pay-per-click in Google, Facebook or another website, meaning an affiliate. You use a numeric pre-determined KPI. If three leads came in that week, that might be green. If two came in that week, it might be yellow. If one came in that week it might be red.Most people confuse activity with accomplishment. Click To Tweet
The reason you want to standardize this is you’re eventually going to try to scale one or two of these four platforms. The way you’re going to determine which one is best is, let’s just say pay-per-click is always green. It’s always three leads per week from the $500 budget, but the others are always yellow or red. You know right now just six weeks in that one budget where we’re putting in $500 is always netting us three or more leads. You want to take the budgets away from the other three or at least a part of the budgets. What I would do is I would double the $500 to $1,000 for a month and see if we go four more weeks in a row, changing the KPI to six. You’re doubling the KPI directly with the use budget. You’re going to want to just blow up the one that’s working if it’s converting into net profit dollars.
Then you take it to the next level. If I was managing that company, I would eliminate the two worst and replace them with two other trial platforms. Maybe direct mail, maybe cable TV or something like that. I would just continue testing until I had that company having six to ten KPIs of inbound leads always performing at a yellow or green level, getting rid of all the reds. The bottom line is, yellow is not green, meaning green is cash. Yellow and red is not and will never turn into green long-term.
Most people confuse activity with accomplishment. They look and feel like they’re busy, they’re checking things off their to-do list. They wake up month in and month out and wonder how come our net profit is not growing? From a person managing, there’s no way these last couple of years we’d be running the numbers we are running without KPIs. At some point, you have to flip from barbaric to bureaucratic and get systems in place. There is no better way to run systems in the early days than to set up some simple KPIs. Yellow is definitely not green. I hope this helps. Take care.
- Managing Numbers, Not People – previous episode