Businesses, even ones of a small size and at a scrappy stage of life, tend to measure things. They keep track of KPIs, they put them on a dashboard, and they refer to them regularly.
Most attention is given to the big things: number of enquiries, revenue, margin, profit. In the weekly management meeting, these numbers appear on the screen, sometimes in green, sometimes in red. When they’re red, there’s much consternation. “Sales are down for the second month in a row. What are we going to do about it?”
The response is often a scratching of heads. There’s no big lever marked “increase sales” that you can pull – if only there were! That’s because sales are an output metric. They’re the result of countless things you do: good work that earns referrals; marketing that reaches new consumers; press coverage; new product launches; pricing changes.
The important thing to acknowledge about output metrics is that they can’t be changed directly; they can only be influenced, by the other things you do in the business. So, while it’s important to keep track of them, it’s also essential to understand what your business’s input metrics are. These are levers that you can pull, that you can change directly, and that influence output metrics further down the line.
Examples of input metrics include:
- Number of leads spoken to
- Number of marketing emails sent out
- Number of events attended
- Number of LinkedIn contacts added
- Number of new product concepts developed
The challenge is that not everything that can be measured is an input metric. A metric is only useful if it influences an output metric we care about. But, by keeping track of both input and output metrics, you can start to develop an understanding of the relationships between them, and to understand which input metrics affect which output metrics.
Sometimes that relationship is positive (“hmm, when we doubled the number of marketing emails we sent out, we saw a 15% increase in sales – let’s keep the volume of emails up”) and sometimes it’s negative. But sometimes you discover that there’s no discernible relationship at all – which suggests that the lever you’re pulling isn’t doing much good, and you should probably direct your efforts elsewhere.