Driving revenue is an essential part of building a business. And for many entrepreneurs and CEOs, it’s often at the top of the list when it comes to setting goals. But should you make revenue your primary objective? At Thinkific, a software that allows entrepreneurs to build their own online courses, we tried this, and it failed.
Every quarter we choose one big goal to unite the company—whether that’s being more innovative or achieving a better response time for customers. For one quarter, we decided to focus solely on revenue as our goal.
At the time, our revenues were growing at more than 25% per month. So we set our quarterly goal to beat that. In the beginning, the team was on board and excited. The ideas started rolling. We ran innovative marketing campaigns, called customers, and launched new revenue channels. Revenue began growing, but it quickly took a turn for the worse. When we hit roadblocks halfway through, people became unfocused, unmotivated, and unsure how to hit the goal. By the end of the quarter, we’d missed our goal, and the team was demoralized.
Here is what we learned about the experience. If you’re a business owner or a CEO, hopefully, some of these takeaways can help you.
1) You need to set goals that inspire people
People may be motivated by money, but they’re rarely inspired by it. Yes, money is the lifeblood of a company, as blood is to a marathoner. But just as a marathoner doesn’t think about their blood while running, teams and entrepreneurs don’t work just for the money. Instead, they work for the impact and think about how your company is going to change lives.
Our best goals have been centered around helping our customers become successful; we help them create and sell courses to grow their business. So for us, we now focus on the number of customers we can help succeed. This approach is far more inspiring because it allows us to tell stories about individual customers and their successes.
If your goal is something you can see a team member telling a story about, especially when you make progress toward it, you’re on the right track.
2) It’s essential to create a connection to your goals
Unless they are in sales, most people on your team will find it hard to tie their day-to-day activities directly to revenue. There’s a better way to make this connection. We started by looking at the data behind our revenue and identifying actual actions that were influential in driving success for our customers and business.
For instance, we noticed that only a portion of our customers finished their first course. So we created a course-building engine that allowed them to drop in some content, and it would build the course automatically for them. This gave our team a clear problem to solve, and they were able to focus their efforts in one area. As a result, more people ended up finishing their courses, which led to more successful customers (our goal.) More successful customers led to higher revenue (which was a bonus.)
If you look at the steps a customer takes when interacting with your product or service, you can often find specific moments where there’s an opportunity for them to make a leap forward. That’s your chance to help them make that leap. If you focus your goals and efforts on these moments of opportunity, you and your team will know what you need to do each day. You’ll have an obvious connection between your actions and the goal you’re trying to achieve.
3) Forget short-term goals and focus on long-term ones instead
Another interesting difference between our past revenue goal and our current set of impact-based goals is its staying power and the types of decisions it drives.
With a revenue goal, we ended up making several quick decisions that ignored the bigger picture (even though they drove short-term results). When we focused solely on revenue, we started ignoring the customer journey. Rather than focusing on what was right for a client at the moment, we drove more to what we wanted: “sign up for another paid plan now please.”
With the new goal structure, I find the entire company taking a longer view. It ensures that we consider the stage of the customer, and tailor our message or offer for the right time. With this approach, not only are we achieving the current quarter’s goal, we’re setting ourselves up for future success as well.
For instance, one thing we did poorly with the revenue-based goal metric was one-off events or campaigns that quickly drove a burst of revenue with no long-term value. Today, much of what we do is evergreen, meaning it works now but also for the long term. Our focus is on adding value to our clients for years to come and helping drive long-term results.
Now don’t get me wrong—revenue and cash flow are still significant. Without it, we wouldn’t be a business. But money is the blood that keeps the company alive and running. It’s not the goal that we strive for, and not the thing that our employees come to work for or think about all day. If you’re a CEO or a business owner, learn from our mistakes. Create more meaningful goals for yourself and your team, and you’ll find yourself hitting new levels of both impact and revenues.
Greg Smith is the cofounder and CEO of Thinkific.