In this episode, Jeff Smith and Shawn Rider break down the importance of tracking the right KPIs in business. They discuss how focusing on the right metrics, such as profit, effective hourly rate, and customer retention, can lead to a more stable and successful business. From revenue to employee retention and ROI, they explain why vanity metrics can be misleading and how business owners should focus on the KPIs that truly drive growth. Don't miss out on understanding which KPIs matter most for your business success.
In this episode, Jeff Smith and Shawn Rider break down the importance of tracking the right KPIs in business. They discuss how focusing on the right metrics, such as profit, effective hourly rate, and customer retention, can lead to a more stable and successful business. From revenue to employee retention and ROI, they explain why vanity metrics can be misleading and how business owners should focus on the KPIs that truly drive growth. Don't miss out on understanding which KPIs matter most for your business success.
Timestamps:
[0:00] - Introduction: Importance of KPIs in business
[1:10] - Defining Key Business Metrics
[3:30] - Tracking Profit and Effective Hourly Rate
[5:00] - Customer Retention: A Key KPI to Track
[7:00] - How to avoid vanity metrics
[9:00] - Building a System to Track KPIs
[12:00] - Conclusion and Why You Should Start Tracking KPIs Today
Key Takeaways:
Tracking the right KPIs is essential to business success.
Focusing on metrics like profit, effective hourly rate, and customer retention drives growth.
Avoid vanity metrics that don’t contribute to your business's bottom line.
Resources:
Tactical Empire Community: Join our community for more tips and discussions on KPIs and business growth.
Book Recommendation: Operation Wealth by Jeff Smith
Infinite Banking: Learn more about this strategy for building wealth.
@realjeffsmith (00:01.316)
Welcome to the next episode of the Tactical Empire. We're joined by Sean Rider. What's up, man?
@shawn_rider_ (00:07.406)
I'm thinking about the meme where like the dog who's a human is standing there with a cup of coffee in his hand and everything's on fire around him. And he's like, it's fine. Everything's fine. You know, it's just one of those. Now, I know life is good. Like my life is legit good, but you and I were just talking about stuff and we cracked a joke and that's the first image that came into my mind was like, just the dude that's standing there like.
@realjeffsmith (00:22.652)
I feel like that sometimes.
@shawn_rider_ (00:36.042)
Everything's going to shit. Here we are. It's fine. Why don't even bring it up. It's good. It's good.
@realjeffsmith (00:40.284)
Yeah.
@realjeffsmith (00:44.316)
In situations like that when life gets that way I always try to acutely examine whether like it's my fault for Have I chased chaos or am I highly resilient in this situation? Because I can tell myself either one of those but I try to be very honest with myself especially about chasing chaos because I I have not at this point in life when I want to be doing that
@shawn_rider_ (01:06.392)
Great.
@shawn_rider_ (01:10.68)
creating your own living hell sometimes is I've been noticing. I've been using that phrase a lot recently when I'm talking to people, I'm like, you know, you're just creating your own hell by like talking about this thing this way and thinking about this and creating this story and getting all worked up. So we all get worked up about certain things. So I have my things as well, but it does actually come up to the topic of the day of like,
@realjeffsmith (01:13.264)
Yes.
@shawn_rider_ (01:34.284)
you know, what we're looking at and how we're looking at it, is it the right things? And in particular, the context at which I'm going to bring this up is, I mean, you could say it for people that have W-2 incomes, but I'm just going to use the phrase business owners. know, business owners, and particularly men, they think the big swinging dick measure is sales, like total revenue. Right off the bat, what are potentially, again, this is different industry to industry.
What are other KPIs that business owners, regardless of the industry, would be more important or as equally important as that revenue number?
@realjeffsmith (02:21.008)
mean, profit, first of all, no question. And then effective hourly rate is the second one, I would say. How much money do you make per hour for the efforts that you put into your business? And this is not to, this isn't for the starters, I guess. Ultimately, after your business is profitable, then,
@shawn_rider_ (02:29.196)
Talk about it.
@realjeffsmith (02:46.236)
you've kind of got that breathing room to where like, okay, now I want to go to the next level of creating how much money I want to make. And then from there, it's like, how much time do I have to spend creating that amount of money ultimately? And you try to create an inversion to where it's less time for more money over time. And that's just as you get more more sophisticated and kind of elevate yourself as running that particular business.
You become more efficient. Like on the last episode, we were talking about money making activities. You prioritize those money making activities and then you prioritize working in your zone of genius too. Cause I mean, we work with a lot of business owners that are under a million dollars of gross, which most businesses are quite frankly, let's be honest. mean, like 90 % of businesses or 95 % of businesses don't ever hit seven figures, which is fine.
@shawn_rider_ (03:34.936)
Amen.
@realjeffsmith (03:41.518)
You can carve yourself out a nice life as a business owner without ever hitting seven figures. And so you really have to be careful about the, the cost of going to the next level, higher numbers, higher problems, higher staff. is there, is there ways to create the exact business you want within the parameters of what you've already created and have, and then, and then it's about.
in my mind, lifestyle optimization and shit like that. like, I don't want to get off track from where you were trying to take the original thing with KPIs. obviously profitability matters because like, and then return on investment, if you put your own capital in on the front end, then if you go out and get a bunch of loans on it, it's returned on leverage kind of, and you want to understand that. And then do you deal with debt? Well, how quickly do you want to get out of debt? All that. mean, but
Predictability is another huge one that came to mind right when you brought it up, meaning you need to understand your sales process, lead flow, lead generation, close rate, show rate, all that stuff you want to really understand within your own walls. That's what's weird about business in these days, with all these virtual businesses standing up and the way business within the creator world and all this other stuff, what does business look like?
even in the mastermind space, consulting space, coaching space, a lot of people have gone to selling by DMs. There's not even conversations. So what does that look like? And then obviously if you can sell high ticket through DMs, you're much better off than scheduling these big long consulting calls with people. so every system is different, but you want to really understand
That's why looking at it as a third party like we get to is where it's very powerful because then you can look at all the different levers they have the ability to pull. those KPIs, I mean, there's basic KPIs that you need to understand in every business. like, what is more important based on the business owner is sometimes based on what they want out of their business and out of their life.
@shawn_rider_ (06:00.438)
Yeah. Yeah. I think profit is the easy one, right? Like you got to be able to make money or else you don't have a business. So let's just throw that one under the rug. Like that's easy. I like all the ones you listed, you know, effectively our effective hourly rate, right? Is how much work do I do? And then, divide that time into how much I make. You could have a thousand dollar EHR effectively hourly rate, but if you're only working or if you're
If you're only working one hour and you're making $1,000, your EHR is a thousand bucks. But if that's all you do, then a thousand dollars isn't enough to pay the mortgage. So EHR complemented with like total of the net benefit. How are you benefiting from your business? That is your paycheck. That is your ability to run certain expenses through your business that are business expenses, but benefit you personally.
And then again, complimented with EHR, how much time do you actually spend on the business versus lifestyle optimization, which you brought up? I would look at the net benefit, effective hourly rate. Within the business, I would do the sales metrics, like you said. We have to sell, whether it's the marketing sales metrics of leads triggered all the way down to close rate or the total front end revenue that we get.
or how often a customer repeats purchase or one time purchases versus subscription purchases, you know, whatever your main product base is, I think I think there's a KPI within there that could probably pull itself forward as as the best above all the others. For example, we had our tactical empire meeting with the team today. And we go over KPIs and one that we don't have on the document, but I've been talking about recently is churn. We have great retention, right? Like we are actually in the top like
@realjeffsmith (07:51.792)
Hmm.
@shawn_rider_ (07:55.16)
two percentile of all Stripe accounts in terms of retention. And I clicked on it today while we were on that meeting and we had 100 % retention last month. Normally our churn is like 1.5 % which is super low. I think any business would take a 1.5 % churn rate. Our churn was 0 % last month which means we lost nobody in the month of July. Any business would take that as a main KPI on being able to keep
@realjeffsmith (08:15.324)
Thank
@shawn_rider_ (08:24.206)
customers keep repeat subscription based customers. Here's a KPI is employee retention complimented with employee benefit, right? So we could say that you have, and this is why all these KPIs have to work in unison to create a full story. We could say that you have huge profits.
@realjeffsmith (08:43.708)
Thank you.
@shawn_rider_ (08:49.582)
But if you're not utilizing some of those profits to reward your best people and then you have high employee turnover, you're gold in one hand and shit in the other. I don't think that's a successful business, because going back to the original comment is the swing and dick KPI, which is people just want to talk about revenues. And I read this in a book somewhere, so this isn't my thought, but I read somewhere where was like construction people or big construction contractors.
They're like, yeah, my business does $10 million. But like in the example, it 90 % of that gets outsourced to other companies because they contract them to do the work. So you have a $10 million revenue business, but right off the top, 9 million of that goes to somebody else that you've contracted. Then you have your own expenses that you have to deal with marketing, get the jobs, admin to get jobs. And then they're making like $100,000 on 10 million, right?
All of this tells a story. so revenues don't tell the full story. I want this episode to let business owners know that you need to create your menu of KPIs and what they represent within your business versus what your expectations are of these. you know, when you're not meeting, we just talked about this with a guy in the 90 day accelerator. Like we said, send us all your financials. And so,
we can find the holes in them based on your expectations from the beginning of the year. And then once we see where that hole is, then we talk about the strategies behind those KPIs.
@realjeffsmith (10:30.672)
But a lot of times people do, people use these KPIs as vanity numbers though, honestly. I mean, they should build as your business builds in complexity, right? Because you need to understand, like if you've got $10 million of revenue, you need to understand before you go spending money on ads and things like that, you have to understand your total addressable market. And then you would want to be tracking your ROAS and return on ad spend and things like that.
that not everybody needs, right? If you're not pushing ads, you don't have that KPI. Before you start advertising, you really want to understand what that looks like in your community as well. from a different business types, it, I don't know. I think the best thing to do is take three to five KPIs and start simple, start tracking that, and then build them out as you find that you need more and more of that information to tell the story.
Cause as you learn how to read those, that data and track that data and see what it's internally doing within your business. Cause you also want to create a system where you don't have like a Richter state scale of volatility of sales numbers and financial numbers. Like you don't want to be a hundred grand one month and zero the next month. And like you want to create stability and continuity in your revenue and, and KPIs help you do that for sure.
but you have to understand what actually tells the story within your business and are the meaningful metrics within your business.
@shawn_rider_ (12:08.44)
There you go, ladies and gentlemen. If you haven't questioned the metrics in your business and why they are what they are and which ones are the gold standard for your particular business, this is your wake up call to do so this week. If you need help, go ahead and reach out to Jeff and I. Jeff, send the people out.
@realjeffsmith (12:28.196)
And what gets watched grows, guys. So if you're not paying attention to these things, don't be surprised when they don't increase and you end up having flat years annually. So that said, up into the Tactical Empire community, give us any questions that you've got, guys. Send us a DM. We're happy to engage with you. If you have any questions about anything, Infinite Banking, Seven Levels of Financial Freedom, Operation Wealth, the book, if you haven't got it, go get it.
hop into our community. We'd love to have you and have a great week and keep kicking ass.