Revenue goals are a joke. There’s no way to predict what’s coming in the next year. Setting them and then being held accountable is, frankly, insane. In the Private Equity (PE) world, it’s borderline abusive. There’s no easier or lazier way for management to dodge responsibility than to point at a revenue goal set late in the third quarter of last year and ask, “Why didn’t we hit that?” before slashing employees and budgets as a result.
Revenue goals are demoralizing. Why endure the annual ritual of poring over numbers from the last couple of years, making your best guess (without knowing how the final three months of this year will turn out), then presenting it? Only for executive management to say, “Ehh, add 10% to that.” No math. No thinking. Just an arbitrary increase.
Revenue goals also damage brands. Companies that once did one sale a year are now running monthly, if not weekly, promotions to maintain the inflated numbers they saw during COVID. This sends the message, “Our brand isn’t as valuable as we led you to believe. You should only pay this much now.” For premium or luxury brands, this is a death sentence.
Goals, in general, are NOT a joke. They just need to be used differently. Let’s say your company made $1 million last year—the first time hitting seven figures—with an unexpected 20% increase over the prior year. That’s amazing. Do you then set a 20% goal for the next year? That’s the PE way: “We did it before, we can do it again. Plus, I get a bigger bonus if we do,” without really understanding how the company achieved it in the first place.
As a small business, you might dig deeper. What caused the big increase? Was it a new product? A new ad campaign? A viral video (Google “Ocean Spray skateboard”)? Can you even tell?
If you can reliably replicate it, go for it. Set that goal and charge ahead. But chances are, you can’t. Something your company did—at the right place and the right time—boosted sales. You can try your best, but the results won’t be identical. That’s how virality works. People build up an immunity to it and move on to the next thing. The same company doing the same thing won’t achieve the same results. Businesses—and PE—need to learn that lesson.
So, what can you do? I believe some variation of Objectives and Key Results (OKRs) is the way forward. You can learn about this method in the book *Measure What Matters*. You start by creating an overall objective, which may or may not have measurable results. Then, you define the events or “key results” that signal you’ve reached that objective. The key results contain the numbers and can be broken down further into initiatives to achieve them.
For example, your objective might be “Build an Effortless Customer Experience” (another great book, by the way). Your key results could include:
- Maintain a Net Promoter Score (NPS) above 8 for at least three consecutive months.
- Close 90% of customer tickets within one business day.
- Launch a chat function on our website by March.
Each of these key results provides measurable targets that can be tracked and addressed if missed. There are initiatives you can implement to improve your NPS or close tickets faster. Plus, this approach gives you multiple metrics for achieving your objective—not just one arbitrary financial goal.
This process also isn’t “all or nothing.” If you achieved a 90% single-day close rate, launched your chatbot in April, but only hit an NPS of 8 for two months in a row (and six months total), would you say you failed at creating an effortless experience? Probably not. You’d adjust your objective for the following year to something like “Create More Company Promoters” and set OKRs focused on increasing your NPS, referral rates, social sharing numbers, etc.
OKRs can include financial metrics, but they should emphasize overall company growth. This growth can take many forms. For example, your objective might be “Increase Company Profit Margins” or “Have a Record Year.” You could come up with a fairly accurate revenue target, but that might limit your potential. Instead, your key results might focus on “Reduce material costs by 10%,” “Increase sales of X product line by $xxxx,” and “Decrease employee turnover rate to XX%.” These individual but interconnected key results can boost profits beyond expectations while giving your team ownership and pride in their achievements—with longer-lasting benefits than a single year’s balance sheet.
In the end, revenue goals are rarely the most effective way to build a sustainable, thriving business. Shifting your focus to broader objectives will drive real growth across multiple departments. By using OKRs, you create a system that values progress and adapts to the unexpected. You’ll build long-term value instead of chasing arbitrary numbers and focus on what truly moves the needle. Then watch your business grow in ways you didn’t think possible.
