Explaining Misleading Sales Metrics From an Entrepreneur

This is a story all about how my metrics got flipped turned upside down. If you'd like to take a minute, just sit right there. I'll tell you how I became the prince of a company right here. That's it. We did it, guys. We did it. There's a massive discrepancy between like what people are taught in business schools and then entrepreneurs because entrepreneurs are not necessarily business operators. Entrepreneurs are more of the visionary type, creative people. And that has a whole bunch of positives and a whole bunch of negatives. And so projections and being able to project out your revenue and the way that I do it at a coaching company, for example, is I project out per revenue center, which is like the different individual products, because I can pull different levers for different products for different reasons. If we're getting really stacked over here in one program, it's getting too full, then what I'll do is I'll like change it so I can make the same money. But then I want to change the products that we sell. So I've got to change the marketing to adjust that without the projection in place. One, you don't have like KPIs, so like measuring your wins is difficult because it's like you're just kind of growing for growth's sake or you plateaued but you don't know why. So having a goal for people to hit I think is important. Also you can then budget and not just budget like I think we'll spend 50 grand this month on this. It's like actually have something in place that you can follow where you can start to have departments. And then also like, it just gives your whole management team, like a North Star that you're working towards. And then you can set up a bunch of bonus structures or whatever around that. But like KPIs like, and projecting out your revenue. It's not taught in many business coaching programs. It's a fundamental of business which is probably missing amongst most of the industry, I think. So you should run three sets of projections. You should run best case, which is the one that you should have your team work towards in a KPI sort of function. Then you should have like what you think is probably going to happen and then you should have your worst case. So your budgeting is done off your worst case. And then like your bonuses are done off your best case. And then you've got something in the middle where the business is happy and growing and everything's happening. But like you're not going to overspend, right? But then you're not going to dramatically underspend either because underspending like it means you won't grow anyway. The difficulty of that is like you have to have a look at like historic data in order to know when there will be like downturns. Like if you've only been running a business for a year, like you don't really have enough data to figure out, like if you grew this much in this month and this month was it because like there's a monthly cycle, like for example, during presidential elections and midterm elections, advertising gets very expensive. So what I would do is, depending on my budget is I would potentially not have growth in those months intentionally. So I would plan to maintain during that three month period, like just around the election because your advertising is going to be extraordinarily expensive. So you can do more like awareness advertising, but not necessarily do too much like direct to sale advertising and then work on your infrastructure and have a boring period on purpose so you can get ready for the next growth period. So that's kind of like historical stuff versus projecting out. But it is important to think about all that stuff. Being able to look at data in an unemotional and creative way is. I don't know if it's like I'm good at it and I've had it explained to me, like you can sift through the bullshit and see kind of what's happening, but other people can't necessarily do that. I think it's a function of like experience. I think that's really what it is, just recognition of patterns. Like if you have someone who's put together a lot of jigsaw puzzles, they probably have a way to go, well, I'll put those over here, those over here, those over here. And then from there you have like a system that you can put stuff together. So like when I look at dot up, I have a super skeptical eye. And a lot of it probably comes from arrogance, especially with sales because like I know what I could produce and if someone's close to it, I usually don't believe it. Or I go like, it's worth looking into, right? Because I knew I was super effective in certain things, but I also knew why I was really effective. And it wasn't just skill. There was lots of like layered things that were making that happen. And so if someone comes into an account and within three months it's banging out 70% close rates. I look at that like very skeptically. Not that I don't want it to be correct, but like, let's have a look at what's happening. So recently I was looking at one of our sales teams. Guy was closing at 70%. And I was like, okay, I've listened to his calls. He's good, but he ain't that good. And I was like, and also he's making sales, but not that many sales. So I was like. So I went into his calendar and just started looking around. And then what I saw is there was a lot of like our discovery calls and then not many sales calls being booked. So immediately I go, okay, well there's two options. Either like, he's just not doing this correctly or he's hard qualifying on triage, which is then basically making him only have like, lay down sales. And so I went to him and I was like, hey man, why have you only got like five sales calls booked from like 50? Oh, this? And I was like, hey man, like, you have a 70% close rate. That's ridiculous. You should probably have a 30% close rate on this account. So you're just not putting people through because you don't think they're an easy sale. And so like, that's from seeing a really positive data point, finding a negative. Whereas, like, that I need to fix. And now that I've fixed it, he'll make double the sales. So he'll make twice the money. He'll have to put in three times the work. Like, he'll have to take three times the sales goals to make double the money because he's gonna be letting lower quality people through. So his close rate will go from 70 to 35, but he'll have way more opportunity. So like, you know, and my sales manager presented me with these figures like, they were incredible. He's like, oh, look, it's close rate and cash. I was like, mate, this is not good. This is a bad thing. You need to understand why. And like, that just comes from lots of experience understanding sales and processes and marketing. It's just a case of like, you've seen so many odd things happen that. And that's why, like, people who are like sales managers who've done one product, it's ridiculous. It's like you can't do that job effectively. You haven't seen enough to be able to go that doesn't check out. Money is like the wallpaper that covers up all mistakes. So if you're tracking top line and even bottom line revenue, but. But you haven't got correct attribution of where the money's coming from and how it's coming into the Business. It's, like, very, very misleading. So, like, we make good money. And there was a time where, like, I wasn't tracking exactly where the money was coming from, but I knew there was plenty of it. And then we got in a situation where, like, that started to change a little bit, and I was like, what's going on here? I couldn't put my finger on why it wasn't growing. Not that it was really going backwards, but it just sort of wasn't growing. And then what I did is I started to, like, work with the bookkeeping team. I was like, where is the money coming from? What's happening? Like, where is this, this, and this? Because I felt like more sales are being made, and then there wasn't enough as much money coming in. And I was like, oh, okay. So what I had them do is I had them, like, break out the revenue into, like. We redid the chart of accounts, which is a big job, because the chart of accounts had kind of grown organically with the business, which means that, like, it's just not very good, right. So we had to do a big reset. And I kind of told them, and they weren't super happy about it. I need the chart of accounts redone so I can segment where the revenue is coming from, and then, like, start to pull pieces together. And what I'd realized is we'd taken, like, one of our guys, Sean, who's a killer, and we put him into, like, a business unit over here, and we'd sort of given him a mandate over here without realizing all the stuff he was doing over here. And he was pulling in on a quarterly basis, around 400 grand worth of consulting deals. And then I put him in charge of a business that sells $3,000 products. And I was like, where? Where all the money? Where did all that money go? But because I, like, hadn't. I had attributed that to commissions. I hadn't attributed it to consulting, Right. Even though it was consulting, but it was coming in, like, fast and furious. And so then I'm looking and I'm going, like, where's that money? Like, where it's going on there? Like, that seems low because the activity hasn't changed. The sales hasn't changed. Sure enough, like, it was his revenue that he generated gone, and then put in a position where he could never generate as much. Right? And so that was a super misleading for me because, like, I thought the business was functioning differently than what it actually was. So then I had to kind of go like, oh, I didn't realize we did that much consulting. I knew we did consulting. I just didn't realize, like, the amount of revenue it was. It turned out, like, in one month, he sold 400k worth, you know, A fucking savage. So, like, that's a pretty. Like, that, like, could have gone wrong if I hadn't have been able to get the team to kind of go in there and fix it. I got fired from a consulting group because he disagreed with me. So I went in and they were like, our sales team is trash. And I was like, well, I'm good at making sales teams good, so sounds good to me. So they're like a big coaching company. It doesn't matter what it is. But I went in and I was like, okay, I'm so confident. I'll just get paid upside, rev share, right? Like, I'll make your sales team better. And so I went in there, like, sort of just. I made the mistake of just believing that their beliefs were true. And I went in and I, like, did the whole spiel with the sales team. Like, I'm here to, you know, take names and kick some ass and chew bubble gum, and I'm all out of bubble gum type shit, right? Like, the whole spiel. And then I started listening to their calls, and I was like, these guys are not bad. They're not great, but they're not bad. And then I was like, okay. And I had a look. It was like, a 5% close rate. I was like, man, that's low. That's like, that's really low, even for the offer, right? So I changed around the sales process, trained them, did stuff to them, and just was dialing it in. It was getting better, but I couldn't get them, like, above an 8 or 10% close rate. And then I was like, all right, I need to explore other things. So I started exploring all the marketing, and the marketing was terrible. It wasn't that, like, the funnels were ugly. It was that there was no rhyme or reason to it. It was just funnel leads go on. And this is like an expensive program. Like, there wasn't any awareness stuff going on. So these, like, I was listening to the calls, and these prospects were just coming in unaware. They had no idea what was going on. And so I was like, well, if we can fix it, we have to create, like, a long nurture sequence and extend the sales cycle of. Which he was not a fan of. I was like, well, you know, and then I kind of went to him, and I was like, hey, man. Like, I don't want to take money off this business, like, if I don't think I can fix it. And your sales team, dude, is actually pretty good. Like, you're one of the few people you should count yourself lucky you have a good sales team in place. Your marketing's terrible. Like, you need an overhaul. Who does it? He's like, I do. And I was like, well, I mean, whatever. It doesn't change the fact that it's really bad. And he's like, no, it's really good. I was like, man, I can assure you it's not like I'm listening to these sales calls, like, this is terrible. And he's just like, nope, you're wrong. And I was like, all right, I guess I'll quit that. Because I was like, I can't help this because, like, I can point you in the right direction. I can get you some consults from people who help marketing. But, like, I'm not here to do your marketing. I'm here to help your sales. And I don't think your sales team needs help. I think they need better leads, which is not something, as a sales guy, I like saying, but it's the truth of the matter, because you have a decent team in place. And he didn't like it, and we parted ways. I didn't charge him a dime the whole time I was there. Catastrophic is a big word, right? I think the. We run 22 sales teams simultaneously. So, like, I think for us, it wasn't, like, misleading metrics that makes it difficult to do it, but it's like the amount of Jesus bolts that we have. And sometimes, like, we don't know it's Jesus bolt until it breaks. So, like, recently, there was something wrong with the sales, and I was like, there's something wrong. And I knew that because the names of the people who were making the sales made no sense to me. And so I was going through, because I have a channel, I see every sale. It's like 20 sales a day. See them coming through, bing, bing, bing, bing. And that gives me a really good sense of what's happening, because I can look at who's making them, what account, what contract, and what cash value. So, like, I can tell the revenue of the business just by looking at that. I can go, ah, okay. I know where we're at. I can also know who's making what commissions wise. And I can know who's making sales and who isn't and what account, what is and what isn't. But I was looking at that, and I was like, this is weird, man. Like, These names are all the new guys. And everyone else is like, how good is it? New guys are crushing it. I'm like, yeah, but where are the old guys? Like, where are my Steph Currys and my Michael Jordans? Like, where are they? And so what had happened was like, as people kind of went from SDR to triage to closer, like, the priorities of their diaries changes. Because if you're a triager, which is a role, we don't really have that much anymore, but that means that your job is to take all the triages. Right. So you're the priority on that rotator. Now. We've moved away from that model now, so the closers do their own triages because it's just a better way of doing it, but they stayed the priority. And so what we had is now we had that, we promoted those guys to sales guys. Some of them got put back to like, SDR outbound functionality. But the ones that had got promoted, they were the primary on all the accounts because no one had thought to change the priority on the rotator because it's like, it's one of those things you just kind of don't touch that often, you know? And so what happened was like, our experience guys were getting no calls, so what they were doing was just doing outbound, doing referrals, just doing their thing. Right. And we'd sort of taught them to head down, ass up and do the work and stop complaining. They just thought the leads were down in the account. They had no idea. Right, Right. So one of them, like Ace, he got three booked calls a week for four months. Didn't say a word. Still made money, but nowhere near the amount of sales that he was. And then I went to Arizona and I was like. And what I saw and how I caught the whole thing was I saw the close I O login, and he was the number one dialer for the month, like the most amount of outbound dials. And I went, how is that possible? Like that? And I was like, how is that possible? That Ace, who's one of our top closers in one of our biggest accounts, how does he have the time to out dial the people's whose job it is to dial? I was like, that's weird. And so, like, everyone else is like, oh, look at Ace getting after it. I was like, yeah, but why is he getting after it? Like, that doesn't make any sense, man. Like, if a sniper came back and said, I used all my ammunition, he'd be like, well, did you kill everyone? You know What? I mean, like, what's happening? So then I went through and I sat down with him. Cause I was in Arizona, and I was like, hey, man, what's going on here? He's like, oh, I haven't had leads for months. I was like, what do you mean? I go, we book three and a half thousand leads, booked calls a month in this account. He's like, huh? I was like, let me fix it. So I went through. Turns out he was just like, not on the rotators, right? Because he'd just been getting booked calls in forums, so he just wasn't getting anything. And then I went through all the accounts one by one and found out that was basically happening on all of them. And so what had happened, it just created this, like, weird economy for this weird little period of time where sales were still being made, right? The accounts were still healthy. But because of that one thing, it meant that our top guys were not getting the calls, which meant cash collection was down, contract value was down, close rate was down, the volume of. You know what I mean? But, like, the money had wallpapered over the problem because, like, our account didn't catch it. They didn't say, oh, hey, sales are a bit down. No, sales are not down, right? Instead of selling the 10k, we're still on the 6. Well, instead of the 6, it's the 3. You know what I mean? So, like, the money had kind of wallpapered over all the mistakes until, like, there was a little chip and you're like, what's that? You're like, oh, that wall's hollow. I better go investigate as to where the rest of the hole is.