When a Key Performance Indicator is underperforming, the answer is usually in a different one
A better first move than chasing the number
When a KPI is underperforming, the instinct is to focus on it. Revenue is down? “Let’s drive revenue.” Margin is slipping? “Let’s protect margin.” Close rate is dropping? “Let’s close more.”
It’s a natural instinct and there’s usually a faster path to the fix.
Revenue, margin and profit are the score of the game. You can’t change the score by staring harder at the scoreboard. You change it by changing the things that produce the score and those are usually other numbers entirely.
This is the foundation of the diagnostic work we do every couple of weeks with clients. When a number is off, you don’t fix the number. You trace it back to whatever’s broken and fix that.
The numbers behind your numbers
The numbers you care about most, revenue, gross profit and profit, are results. You can’t move them directly. What you can move are the things that produce them: your margin, your pricing, your close rate, your average ticket, your lead volume, your capacity. And behind those are the specific actions you control: estimates written, calls followed up, prices set, people trained.
So when a result is off, you don’t push on the result. You trace it back to the number that’s causing it, checking in a sensible order until you reach something you can move. That’s the lever. Fix it and the result follows.
A specific example: revenue is down
You look at the quarter. Revenue is behind where your goal says it should be by now. The instinct is “we need more revenue.” But that’s rarely the move that works first.
Here’s the order we work through:
Start with gross profit dollars. Revenue is the top line, but gross profit is what the business runs on. Pull up your gross profit against its goal. If you’re hitting that goal, you’re fine. A revenue dip that doesn’t dent your gross profit isn’t an emergency. If gross profit is short of goal, keep going.
Check your margin. Is your gross profit margin where it should be? If it’s off, the problem is in your COGS or your pricing. Maybe your material or labor costs have crept up, or you’re discounting too much and your prices haven’t kept pace.
If your margin looks good, turn to sales and marketing. A healthy margin with gross profit still short of goal means the issue is volume, not profitability. Now it’s worth reviewing your lead volume, close rate and average ticket. That’s where the missing revenue went.
The “we need more revenue” reflex would have sent you straight to marketing and ad spend. But if your margin was the real problem, every dollar of that effort would have been wasted. Working in order, gross profit first, points you to where to look.
When you track them together, this gets fast
The walk above sounds like detective work and the first time through, it is. But when you’re tracking this whole collection of KPIs over time, side by side against their goals, the same evaluation takes seconds. You glance at your numbers: gross profit short, margin behind, pricing the likely culprit. The diagnosis that used to take a meeting and a spreadsheet is sitting right in front of you.
Want help diagnosing what’s happening in your numbers? That’s the work we do together in every coaching session.