“What’s a customer?” It sounds like a simple question. Yet when I talk with companies that struggling to scale I get different answers everywhere I look in the company. It is the same for nearly every metric that are being used to manage the business.
When has a customer churned? The second they stop paying, or are they still a customer till the end of the month? When does a sale turn into a customer? When they are invoiced, or maybe when they pay or maybe it is when they start using the product. If you offer a paid trial are they a customer during the trial? Can a trial customer churn?
Definitions change from department to department. They change from report to report and sometimes they even change even within the same report. Definitions change over time yet are still benchmarked historically.
This isn’t unusual and it’s not just semantics. It is the rule for companies that are trying to scale past the €2M annual revenue mark. Everyone is reporting and held accountable on metrics but there absolutely no consensus on what those metrics mean beneath a surface level of understanding.
If you think something is important enough to measure then surely it is important to know what it is that you are measuring? When you ask for a report you want to be confident that the person creating the report has the same understanding of what the subject of the report is as you do. Tring to manage a company where everyone is working off of a different version of the truth is very difficult. Trying to scale with this level of uncertainty is a near impossibility unless you have strong market winds behind you.
Define your metrics. You will be surprised at how difficult this is but remember unless it is already written down in a well communicated then everyone is defining it for themselves. Have a company glossary or dictionary of terms and definitions that everyone report should reference.
We all know that communication is the largest challenge in scaling businesses. How can we effectively communicate if everyone is using a different language of the most important aspects of the business?