The Power of Simplicity in Business Metrics

0:00If you're tracking the wrong metrics, then you have no idea what's going on. If there's only vanity metrics and you can optimize for the wrong things. But what I've also seen happen is companies that are tracking the right metrics, but they're not clear on the targets for those metrics. Because if you just track stuff and you're like, we're tracking things like, yay. I mean, I guess you could like, you know, tour people around your office and show them all like these pretty, you know, business intelligence dashboards and things like that that you have. But if nobody really knows what is the goal of those metrics, then they're not useful at all.

0:35So there's the metrics that you track, but there's also the targets. And I think one of the things that you and I have both seen in different aspects of multiple businesses is when you select the wrong targets, it can just be massively demotivating. I think you had an example that happened at a company that I know you do a lot of work with. You want to kind of tell that story before we dive in?

1:02Hey, everybody. Welcome to another episode of Business Lunch with your host, Ryan Dice and me, Roland Frazier. Ryan, how are you today? And I kind of know that's a loaded question today, so I'm excited. I'm freaking dying, man. I'm dying. Yeah, for our listeners, bit of a disclaimer, I'm on day three of a three-day water fast. That doesn't mean I'm fasting from water because that would be a bad idea. I'm only drinking water. So day one was two servings of bone broth, which, by the way, I thought I would like nasty. Is it? I don't think I've ever had it. I've seen it in time to time. So imagine like eating a, you know, a chicken noodle soup, but there's no like there's no chicken and there's no noodles.

1:46It's the broth, but the broth has no like salt in it whatsoever. Like, so it's generally flavorless, but also if you don't drink it fast enough, it goes a bit gelatinous. So yeah. So that was fun. So that's, and then, and then you drink like a couple liters of water and then the last two days have just been drinking water with like some electrolytes, um, has what the body needs. Um, and, uh, that, that's, that's been it. And so, yeah, man, I am hangry. Um, I like the endocracy reference. You like that? Yeah, that was for you. Yeah, no, so I'm super angry and I'm really stupid. Like I can clearly tell that I'm not firing on all cylinders.

2:26So this should be a fun, fun episode. I've never really done drugs. I can imagine maybe if I was just a little bit high, but also pissed off that this is how it would be. I like that they kind of, they're like, well, it's really only two days of water fasting because you get, you know, you get a good dose of bone broth at the beginning of it. It's like, like that's going to make a difference. That's pretty funny. to me. Yeah, it didn't. It was, that was my least favorite. Uh, actually, no, today's my least favorite day. I'm super excited about getting some like yogurt tomorrow morning. Um, you have to go back on slowly as well.

3:00Is that part of it as well? Yeah, that's what they, that's the recommendation. I don't know. We'll see. I, I'm happy. Like I'm down five pounds. It's all like a home run at Denny's, uh, tomorrow morning to kind of break. So as weird as that sounds, like, I don't know that my stomach could handle that like I because it sounds great but I don't know I can handle it but I'm down a few pounds in a chin um it's a good opportunity for a reset uh that that's kind of my main thing I know it's you're always just you're just purging like water weight it's not like it's a healthy thing to do but I don't know somebody told me that it was a good thing to do for like my cells and all this other junk and I was like you know what I need to do something to like kickstart my fitness regimen that's a good thing sucks are you freaking sucks are you losing water weight if you're drinking a bunch of water?

3:48Supposedly, it's just, so what you're hearing is what I've read on the internet. Okay. So I'm not a doctor. Okay. Like scientific evidence. This is not, supposedly there's water that's kind of trapped in the cell walls that, that when you do a fast gets purged and all kinds of other stuff. And I'm, you know, I do feel lighter and leaner. There's no doubt about that. But I think anytime you just choose to starve yourself, that's going to happen. Like there's nothing particularly magical going on. It's good for habit reset too. You know, I mean, I was, man, I just got back from your house. You know, I stayed with you for a few days and you are an excellent host.

4:30And I ate like a freaking idiot the entire time I was like, like I had that dang chicken sandwich for lunch every day, like five days in a row. And I mean, you saw it like nobody else could finish it. I was dominating that sucker plus the prize. Go back to your place. We eat a massive meal, drinking all the wine. So yeah, my body needed, my body needed this. I love it. Well, that all said, how about you? Are you, are you, you know, fine? Good. Hey, Ryan Dice here, co-host of Business Lunch. And before we get to the show, I have an exciting invitation for you. My business partner and Business Lunch co-host Roland Frazier and I are hosting a live in-person event and if you're a bootstrap business owner who wants to build a 10 million and even 100 million dollar business in the next three years you need to be there.

5:19This event is called Get Scalable Live and over the last four years it has transformed from a small gathering of entrepreneurs into the largest bootstrapped entrepreneurship conference in North America. Now I know what you might be thinking you're probably thinking, Ryan, really another business event? Is that really what we need? But trust me, this isn't just any other event. You see, unlike most conferences at Get Scalable Live, you'll have dedicated time to take action and actually work on your business instead of just in your business. Over three days, you'll work shoulder to shoulder with like-minded entrepreneurs to implement what you're learning and get valuable feedback that you're just not going to be able to get during the normal day today.

6:01You're going to be immersed in fresh ideas, strategic insights, and you're going to get the support and guidance that you need to actually reach your business goals. So this is your opportunity. This is your chance to step out of the day-to-day to eliminate the noise and finally work again on your business, not just in your business. And if you implement, I'm confident about this, if you implement just one or two key insights from any of our sessions into your business, you're bound to see a return on investment much higher than what we could ever charge for admission. And by the way, speaking of admission, right now, Business Lunch listeners can save an additional 10 % off of our already low early bird ticket pricing.

6:43So just head over to GetScaleableLive.com and use promo code LUNCH at checkout. Again, that's GetScaleableLive.com, promo code LUNCH. It is truly amazing what can happen when you step out of the day-to-day and spend just a little bit of time surrounded by other powerful business owners. And since this opportunity only comes around once a year, you don't want to miss it. Again, the link is getscalabellive.com and don't forget to use promo code LUNCH at checkout to save up to 67 % off the full ticket price. That's all I got. I'll see you in Austin. All right, back to your regularly scheduled programming.

7:25I am good. Yeah. I'm getting ready to, uh, to head down to Mexico for, for, uh, a vacation, an actual vacation and, um, and I'm very much looking forward to it. So that's, uh, that's good. October coming up. I mean, we've had, as you know, very busy, busy, busy time. And, um, even though as we're recording this, it's, uh, it's the beginning of September. I feel like if I look at what's left in September going into October, it's kind of nonstop. And so I'm very happy because I didn't really get, you know, what I would call any kind of vacation during the entire summer. I kind of blew my vacation time at the, you know, around my birthday earlier in the year.

8:08So I'm like watching everybody's, you know, yeah, I'm here and I'm doing this and my feet are up on the beach and I'm doing that. You were going all over the place with your kids and stuff. And I was like, man, I haven't really had any. And I know what's coming. So this was the little window that I could do that in. So that was, I'm very much looking forward to it. More than normal. Enjoy your taco and margarita fast. Yes, exactly. Taco and margarita fast is what I'm going to do. Seven day taco and margarita fast. So anyway, that all said, we were talking about, before we got on here today, we were talking a little bit about scorecards and keeping track of things in your business.

8:52And having just kind of been immersed in a few consults we did, I thought that it would be good for us to talk about some of that. So because how you're doing, like people ask me and you, I know all the time, it's like, how do you guys have so many businesses and keep up with them? That seems impossible. And one of the things is we talk about one of our exits is exiting the org chart. So ideally, you're not on the org chart of those businesses that you're adding to your portfolio, even if you are on the org chart or should be for one of the ones that, you know, that's like your main gig or something like that.

9:31But the answer for all of that is scorecards and something that gives you some sort of report on how things are going. So I thought what would be really cool would be maybe to talk about first, just for you to kind of outline the scorecard part of the scalable operating system. And then maybe we could talk about how that works in practice and some of the places that that can go wrong. And it's not necessarily that your scorecard is wrong. It's just that it's garbage in, garbage out. You've got to have really good data going in to be able to make decisions on. So how does that sound? Yeah, no, I think that sounds good because one of the things that we've seen is that if you're tracking the wrong metrics, then you have no idea what's going on.

10:20If there's only vanity metrics and you can optimize for the wrong things. But what I've also seen happen is companies that are tracking the right metrics, but they're not clear on the targets for those metrics. because if you just track stuff and you're like, we're tracking things like, yay. I mean, I guess you could like, you know, tour people around your office and show them all like these pretty, you know, business intelligence dashboards and things like that that you have. But if, if nobody really knows what is the goal of those metrics, then they're not useful at all. So there's the metrics that you track, but there's also the targets.

10:54And I think one of the things that you and I have both seen in different aspects of multiple businesses is when you select the wrong targets, it can just be massively demotivating. I think you had an example that happened at a company that I know you do a lot of work with. You want to kind of tell that story before we dive in? Yeah, sure. So it was kind of interesting. We were looking at affiliates and the team that drives affiliate sales basically to the business. So, so this business has a significant amount of affiliates and several hundred and that, that are active in referring because we, we have had previously, I think we had 18 ,000 affiliates once and realized that there were, we fired like all of them, but 50 in a business that we had together.

11:47It's like, yeah, And it actually made more money because we spent time on those 50. So these are actually people that are actively sending leads to the business. And so the affiliate team is responsible for going out and finding new affiliates and then getting them set up to send business. Right. And so we one of the issues was that there were over 100 affiliates that had been referred recently that were on the they were actually on the pending list. So in other words, they had said, yes, we're affiliates. They got signed up and everything. And then nothing was happening with them. So they had yet to send the lead.

12:37and so the task was let's talk to the affiliate team and say, hey, I mean, that's a lot of business that's just kind of sitting there. What's going on? And as we dove in, we found out several things. One thing that we found out was that the people who, the primary person who was in charge of getting the relationship started, basically that would be biz dev, right, would have the conversation and the affiliate would kind of commit. Not fully, not like say, yeah, let's go, let's sign up and let's start referring, but would basically say, yeah, that sounds interesting. I'd love to, you know, love to, let's just, let's be generous.

13:31So let's say that sounds good. I'm definitely, you know, definitely sounds good to me. Okay. Well, then that would be marked as, as committed. And so they'd move from a lead. Yeah. They, they move from a lead to, okay, they're an affiliate now. And there was nothing in between. And so the next thing that would happen is that then the AE, the guy that's responsible and the team that's responsible for getting that thing going, like, because there's API-ing and all kinds of stuff that has to happen and, you know, creatives have to be sent and agreements signed and things like that. they would then be like, okay, call them up.

14:13Here's all the stuff that I need you to do. Here's the stuff to sign. Here's the connections I need. Here's all this other stuff. Basically, here's a ton of work for you. And then nothing was happening. So as we kind of got into like breaking down the process, the first part of the process was, look, if somebody hasn't yet absolutely said, yes, I'm connecting you to the people in my company that will do that. I'm going to have a call with you and them to do a kickoff and onboard, then they're not an affiliate. And if they do that, they are not still activated until they send a campaign out, right?

15:01So until there's leads that are delivered and a campaign that's sent out, which are two different ways that they can be an affiliate. One is if their terms of service allow, they can send us leads and we can call on their behalf and then start selling immediately. And the second thing is we can run a webinar and, you know, do marketing and, and get people coming in that way. And the, the marketing leads are better than the, what we call data leads. So the, the dashboard, and, And it's funny because the week after that, this was last week, this week, the CFO in our meeting, our weekly meeting for that company said, hey, you know, I think there's a challenge because affiliates used to be worth this much.

15:45And now they've gone down to this much. Last year they were worth X and now they're worth, you know, 0.2 times X. and um and so that we had the ability to say well actually here's the challenge we we funnily enough identified last week that number one biz dev has to have an actual commitment to onboard before they get put on the aes list to actually have conversations about onboarding because they're not committed so we need a new category that says leads for affiliates that are interested And then we need to have a category that is committed that basically then gets onboarded where they've actually said they're going to do this.

16:31And even when they're committed and they've signed all the stuff, they still aren't an affiliate for the account management team until they're activated, meaning they've got to send out something. So we need somebody that's really focused because we have enough of them that we should have people that their only job is get these people going. And so we decided we need to have a kickoff campaign. We need to separate the data leads from the marketing leads. And so that we can get the data leads immediately and start sending them money, which will make them happy while we're also still trying to get the stuff done, which takes longer because data leads can happen instantly.

17:11Marketing leads could take a month to get set up for. And so classifying it into those different categories was a big deal. And also what was happening was the affiliate team was being heavily demotivated because everybody's on them saying, man, you're getting more and more affiliates signed up that aren't doing anything. What the hell are you guys doing? And therefore, because they were focusing on all of these people who weren't even yet committed, they weren't giving proper attention to the people who were committed because resources are limited. And so now they could be nurturing these other people better and focusing their efforts on the new people who had just activated and were actually sending things out to optimize their stuff.

18:01And so all of that was kind of going into, and there were several other things too, but I won't go on and on. But all of that goes to that the data that was showing up on the dashboard that the CFO was looking at that caused the CFO to say, we've got a problem. Either we need better affiliates or something, but the whole value of this proposition we've got is at jeopardy because this has dropped so much. And if you didn't have the whole backstory to that, you would probably believe it because why wouldn't you? I mean, he only had that to work with. So I think that's a really good example of how important it is to be sure that the data that's going into these numbers that are showing up on the scorecard is correct.

18:45And also that when you dive in, you first principles it and say, you know, well, so let's talk about how this should happen. You know, how is it happening now? And then how should it happen if we could just wipe the slate clean? And you might find that you actually need a pretty significant rehaul of how you look at things and how the data gets analyzed and documented and then shows up on the scorecard. Yeah. And so, I mean, that's a good, that's an example of, because there's a lot of ways to mess up with scorecards. The first way is to not use scorecards at all, to not track any metrics. You're just totally flying blind.

19:21You see at the end of the month, how do we do revenue wise? Oh no, or yay, but you don't know how you got there. That's obviously not good. The second mistake is tracking the wrong metrics. So those could be vanity metrics, some metrics that just don't matter, but they make people feel good. Look at how many unique visitors we got to this webpage. Look at different things that you don't know that they necessarily lead to anything. There's also tracking the right metric, but having the wrong definition or the definition be unclear as to what that metric is. So that's what you're saying there. How many active affiliates were generated?

19:55like new active affiliates, activated affiliates. Well, what is an activated affiliate? In that case, the definition is unclear. We see this happen a lot of times with the definition of what is a marketing qualified lead, an MQL. So a lot of the companies, it's marketing's job to generate MQLs to hand over to sales team that would then look to close them. But nobody agrees on what an MQL is. And even if you go and look at what a definition is, it's all over the place. And so having the right metric, wrong definition, and the other way you can screw this up, is to have the right metric, the right definition, but the wrong targets.

20:31And so all of these are ways that, and again, going back to the MQL example, this happened at one of our companies where we changed what the definition of an MQL was. So sales was complaining, oh, there's too many unqualified leads coming through. Okay, we can change what we define as an MQL. We can redefine it differently, but we're not going to get as many. that's okay because they're going to convert at a higher rate, but oops, in this case, we forgot to update the target. And so marketing is frustrating. Everybody's upset at marketing because there's not enough leads forgetting that, well, we all said that that was going to be the case and we simply didn't update the target.

21:11So those are all the ways that you can screw it up. It might be worth kind of going into, I'm happy just to, to just go into how we go about building these things though, because that would probably be the right place to go from here. Do you think? I, because I think that's significant. Let's, let's make this the, uh, the, the episode where we talk about it's important and here's some challenges that you can have with it. And then let's dedicate a whole one to that. Does that sound okay? Cause I feel like that. I think I can bust it out in like five minutes. Okay, cool. Let's do it. I mean, cause it's really not that complicated.

21:45Like when you're building these scorecards, cause the key is you got to keep it simple. What I've seen in a lot of businesses, they invest, and we've done this tens of thousands of dollars, hundreds of thousands of dollars in complex business intelligence tools that, you know, everything is being just kind of sucked in from different places and parsed and graphs and stuff are being spit out on the other side. And because nobody understands the data that's going in, it's telling more lies than truths. And so all of our dashboards, like the ones that I look at, they're just on Google Sheets. And a lot of people like, oh, that doesn't seem, you know, complicated enough or, you You know, but then doesn't all the data have to be entered manually?

22:26Yes. That's the second thing. So I want a simple dashboard on Google Sheets, and I want the data to be inputted on these manually. And the reason I want it to be inputted manually is because I want people to know their freaking numbers. And something magical happens when once a week, so all of our scorecards are updated weekly that I'm looking at. There are plenty of other analytics dashboards and things like that. They're updated in real time. But what I'm looking at is a scorecard that gets updated every single week. And the people who are responsible for those particular metrics, their name is literally next to the metric.

23:05If you hover over the metric or you click on the metric in Google Sheets, a comment pops up with the definition of how that metric, how we define that metric. So it's clear to everybody. Everybody can see who owns the metric and everybody can see how we define the metric. And then we'll also sometimes put in there, how do you go about getting access to that metric? Because sometimes you got to parse some data in different places to get it. So all that is clear in black and white for everybody to see. Then they update it manually. So they're going to come in Monday morning and they're going to update their metrics.

23:35It doesn't take that long because, again, we're not tracking everything. We're only tracking the essential. And so what we get a sense of right there on Monday morning is how are we doing? And they're going to compare the actual today with the target. and they manually have to make a subjective call on, is it red, yellow, or green? And green is, and that's again, just a manual dropdown. And green is we're on track or ahead of pace. Yellow is we're behind, but with a plan. And if they're going to put yellow, then in the little notes column, again, in Google sheets, next to the color, they've got to write in a little note about what their plan is to get back into green.

24:15And if they don't have a plan, then it's red. And red is we're behind and we don't know how to catch up. And so scorecard-based leadership now becomes really simple. I don't need to know all the metrics and what they mean. If I'm curious, I can click on it and I can see the definition of the metric. But all I really need to do is look at what's red and say, okay, team, what needs to be true to turn red to yellow, yellow to green. And I think when it comes to metrics, we so overcomplicate what we're tracking. We try to track everything. You don't need to track everything, right? For most teams, there's a handful of metrics at any given time that you want to look at to get a real clear picture, to tell a story about how it's doing.

24:57And we update our metrics dashboards monthly because sometimes priorities change. But if you've got a simple dashboard that's updated weekly, that's being manually, the data is being manually input. Now you're going to actually get some insights because when the people go and input their data, if they own it, they don't want to put red. So they're going to see, oh crap, we're behind. What can I do? What can I come up with? Because I don't want to show up at a meeting with a red metric. And that's how we do it. I mean, it's really not that complicated. There's plenty of other data that is accessible elsewhere, but I want to have a singular sheet, you know, a CEO scorecard that I'm looking at, that all I got to do is look what's red.

25:39And if I see that everything is, you know, green and yellow, great. If I see that everything is green, then the trick is, okay, which targets do we need to raise? Because we're sandbagging here. And that's when real growth and scale happens is when you raise your standards and what was green becomes yellow. And that's just the game. But yeah, I think where people mess this stuff up is they track the wrong metrics. They don't have the right definition of the metrics. There's not an agreement on what it should be so that you get confusion or the targets are off. And when the targets are off, you can do the right thing.

26:14I mean, just tell a quick example and then pass it back to you. We had made a change on the sales team where we wanted salespeople to be doing less outbound dials and more processing, more inbound. because we had shifted the model to where there was a lot more leads coming inbound. And we really wanted them to focus on those inbound leads that were coming through because those were higher value, higher intent, more likely to dial the vine. Unfortunately, those salespeople also had a target of doing X number of outbound dials a day. Well, we didn't change that target when we changed the sales motion.

26:53And so they weren't following up with the inbound leads quickly enough. And when we asked them, hey, why aren't you getting these inbound leads? they're saying, well, I got to hit my target numbers. I've got to hit my outbound dials. We're like, crap, we forgot to change the target to align with the new goals. So just make sure you're tracking the right things. Make sure that everybody agrees on the definition of that particular metric, and then make sure that your targets are clear and that they get updated regularly. And that's how you can have scorecards that actually are meaningful, that tell a story, and they don't discourage your people.