Is Sales A Numbers Game? - CIFC Episode 127

A lot of people probably don't know that. Of sniping. They watch movies about snipers and they're crawling through mud and shit.

Notebook.

Yeah, but, like, there's a table. There is a table. And you go, what's the temperature? Where's the wind coming from? What altitude are we at? What's the weight of my. In grains of my bullet? What's the angle that I'm shooting at? You plug that into an equation and it says, do this.

It's long enough. What direction am I shooting in?

Yeah.

Hey, guys, what's up? Matt and Pat here. And we have another episode today. We're going to be going misleading metrics within business, within sales that are going to get you unstuck if you don't understand how to unravel that. So if you're someone who wants to make more money, likes money, or just generally is interested in good quality information, make sure you stick around all the way through to the end. And we will drop some knowledge as best we can. I mean, at this point, if you listen to this podcast, you will make your first million within three years. We're here to make podcasts. You really want this? You listen and review.

So something funny happened a little while ago on Instagram and it made me think about misleading metrics. So we. I don't know, did we talk about it here on a podcast one time? Like David Goggins.

There's no way to know.

Me and Boosh have this kind of. Boosh, who edits this.

Right.

Have this kind of running joke about David Goggins. I have no. I don't feel about David Goggins one way or another.

I don't believe you.

But we had. But we had a conversation one day about the personalities within Special Forces units. And I think you and I are in a unique position to talk on those. Maybe me even more so because I spent two years at what was at the time called the Special Forces Training Center.

Yeah.

Selecting and training guys to go through. And they're like ultra tough, like, obsessed with the hardship personality.

The fitness super. The super fitness Pack is not a good place to be.

Yeah. Those guys get through selection. And the reason that they get through is because they're not difficult. It's not hard for them. The whole point of people getting crazy fit for Special Forces selection is they're trying to break you physically so that they can see what you're like mentally.

Yeah.

And if every now and again you get these guys who are quite suitable for the job, but as it is put Together, selection wise. Yeah, but they enjoy the hardship. The hardship is the mission for them rather than the mission itself. And they'll choose the hardship over completion of the mission. And the reality of Special Forces is that very often the hardship is boredom. The hardship is doing nothing. Not doing the crazy activity. Every now and again you're gonna have to run 20 kilometers carrying 70 kilos worth of gear. That's gonna happen every now and again. So you have to be capable of that. But when you've done that, you're then going to sit there for 10 days with that 70 kilos a gear or.

Even just like it might just be driving long periods of time.

Are you just doing nothing?

Yeah, Trying to stay awake on an atv.

So I just kind of had that conversation with Boosh one day and I was like. Because he had a David Goggins quote on his Instagram, get hard, stay hard, stay one of those. So as I say, there's. I have no issue David Goggins. I all the power to him. Good luck. But I just had that conversation with Boosh. So one day recently, the ad for David Goggins comes up in my feed, right?

He's doing an event in Sydney.

He's doing event in Sydney now. I reckon I was targeted because I follow Joe Rogan being a podcast bro like we are. Of course you follow Joe Rogan. I mean he's the guy.

It'd be rude considering how closely he follows this podcast.

So that ad comes up and I commented on the ad, hey Boosh, we should go, right? As kind of a joke, right?

Welcome to the algorithm.

So now I start getting smashed with David Goggins ads. Like they are doubling down on me. And then Booze writes back again in the joke of like, haha, yeah, let's do it. We can try and get him on the, on the show, on this show right now, anybody, the algorithm is going to look at that and go for sure, this dude's 100% interested. And even if you ran the like the test over it and got a real human being to read the comments and decide who's getting it, all I said was, hey, Booze, we should go. So now me and him, he might still go, who knows? In the targeting and that. For me, I initially I sort of identified straight away, I was like, that's a misleading metric. And that indicates that someone is super interested in going to something that they're not. Now that's one person on a whole big event. I'm sure it has no real impact, right? But I just Thought that it was worth opening the door and the conversation about misleading metrics, not just in marketing like they're doing, but in sales and business in general. Over to you, expert in those things.

I think one of the hardest things about business, especially in the online realm, is the effective attribution of data. It's been a bugbear. I haven't met a business owner yet where they're not looking for better data. You know, there are some great softwares around. Like, Hiros is a great one run by a guy called Alex Becker.

Okay.

Which is like a lead attribution software. So you kind of link it up to all your systems, your payment gateway, your schedule ones, your Facebook ads, everything. And then it kind of tracks. So you can go, oh, that person started there, went there, went there, went there. Right, okay, right. And that's like how we have it. We have an SLO funnel at seventh level, and we attribute, like, because we have a special. An individual running that. And so, like, they get a percentage of whatever comes in. And that's all attributed through Hiros. Right. That's the only way we could do it unless you manually do it. So there are good mechanisms out there, but it's also like, there's lots of oddities, you know, like, how do you account for someone going here and then coming here and then coming here? Like, what if they listen to the podcast and that's how they get interested and they just by happenstance happen to see that ad and then buy. Did they really buy because of that? They buy because of the 17 podcasts they watch. Yeah.

And that ad just was the first button they saw to click exactly them down the funnel.

So, like, there's so many things like that that you have to try and reconcile, I think, which is really difficult, especially in the online realm. Actually, to be honest, it's probably especially easy in the online realm. I remember I was going down the road of looking at radio advertisers and it was like, yeah, yeah, minimum ad spend 40,000amonth. And I was like, okay. And they're like. And then I was like, how do I tell? And they go, well, you have to set up a new phone line for every locality. And I was like, and how many localities are you going to do? They go about 25. And I was like, you need me to set up 25 phone lines and then have someone manning them all day? Because the call to action is coldest number. I was like. I was like, that sounds like a lot of work, guys. Like, I don't know Yeah, I don't know how I set. Like, I need an infrastructure that I just don't have for that.

Yeah.

Like, so, like, attributing that data, I would say, like, it sort of first came to me, the first most misleading metric was close rate.

Okay.

And that's kind of where I was like, actually, it's that offers made bullshit.

Yeah.

Yeah, that was the most misleading metric. So I think we were talking about.

The podcast that was last week. Yep.

Yeah. Bad offers made and all that kind of crap. So that was a really misleading metric because what it did is, is it put in an emotional layer over something that's not emotional. So then now all of a sudden, you're kind of taking the data and then you're kind of misrepresenting it in a way that makes the person feel better. And then from there, you're making business decisions based on data that isn't true. It's just whatever makes that person feel good. Because I don't know many people who would, like, self report a bad close rate if they had the option.

Well, I think close rate's an interesting one that we certainly have touched on heaps of times in that. That's. It's an interesting number, but probably not something that you really consider that useful. There's so much more to take into how that close rate got to be what it is rather than letting it stand alone as an interesting metric.

I would say, like, there's a. When I. When I have. I have a look at, like, say, the businesses that I've got, like, there's a lot of things that can throw you off. And so I'd say the first thing is, like, how is your accounting set up? Are you set up on an accruals or on a cash? Right. That's a big differentiator for a lot of businesses. I remember I was.

What does that mean? What are those?

So accruals is like, you look at revenue. So let's say you. You sign a contract for 150,000, that person's going to pay you in five lots of whatever. Right. 25 or whatever it may be. Then from there, like you would attribute. If you're doing accruals, that would be $150,000 worth of revenue.

Okay.

Right. But then from there, you would. Then the cash would come in. And so what you do is you have. You have a liability coming to the business for 150,000, and then you have the asset come in, which is like, the revenue. Right. So. And then what has to happen is that like the cash comes in as well. And then as that cash comes in next month, the liability goes down.

Okay.

And then from there that money that's called like, that's actual earned money then goes into owner's equity.

Okay.

Right in your balance sheet. So that's kind of how that works. Which like a lot of people don't understand, especially in the space that I work in. Because like I was having a chat with a guy a while ago, they're like, oh man, like ever since we. This is a really misleading metric which like could sink the business. And I've seen the guy wearing a lot of things you probably shouldn't be wearing, I think. Right. Like each to their own driving things they shouldn't be driving. But they've gone, oh man. Ever since we got this new finance company, our profits skyrocketed. And I said, no, it hasn't. They go, no, it has. I said, no, it hasn't. I go, did you massively increase your pricing? Like, no. If anything we make less on the. Because like the finance can take us a cut. And I go, then how's your profit increased? Oh, because we're taking it so much more cash. I was like, yeah, but like you still have the associated expenses. You're just taking the cash in all at once. You still have to attribute that.

Yeah.

You know, and even if you have cash basis accounting, which is just that the cash comes in, the cash comes out. Like, yes, you'll so show a higher profit. But like then you just, you have to keep that like, so like that's a super misleading metric because that person genuinely thinks that through collecting more money up front that their profit is increased. Which is impossible. Yeah. Because your associated costings have not changed. If anything, your profit's gone down because now you're giving a chunk to the finance company. But because so much more cash is coming in on the front end, their.

Front end, like you're making.

Their return of ad spend is much higher. But it's because they're not attributing that over, over the six months because the six month program, that seems like a pretty obvious thing to me. It. I agree, sir, but like, that's just not like people aren't taught that. And so people are taught, like they go to business coaches. Like when I wanted to learn finance, I didn't go to a business coach. I signed up to Harvard's online business school and I did the Finance and Accounting 101 course. I was like, oh, this has provided me with a good amount of information. So then I understood that and I was like, oh, sweet. I have a pretty good idea. I get to speak to my accountant. I got, I like, I use the course and went through our own books so I could have a better understanding. I was like, okay, now I have a good enough understanding of this to be able to talk to an accountant on a decent level.

Okay.

Not like I don't need to have CPA level knowledge.

Yeah.

But working knowledge is important. But people go to business coaches and they just get taught sales and marketing bullshit.

Yeah.

You know, so it's like they think that's running a business, which is a real problem.

We've, we've talked about that. I've got so many episodes on that.

Yeah, yeah.

What is that? Profit First Accounting. Because I, I remember we did a whole video. It's a saying that people should do it. And then one of the comments on it was like, oh, but you're not doing it right. And then I was like, hang on. And you were like, no, you don't understand it. You didn't watch the video. So, yeah, explain to us what.

So Profit first is a methodology by a guy called. I think it's like Michael K. Something or other. I'm sure we'll link it somewhere. There's a book. You should definitely buy it. Right. I'm sure we can set up an Amazon affiliate link to make money off that somehow. But it's, it's really worthwhile now. Is it perfect? No, it's not. But it's a accounting methodology that a business owner can use. Yep. Right. And that like a controller can use and you can have in a business that like will just ensure that you just don't it up.

Okay.

So like what it is, is you have revenue. It can get more complicated depending on.