Why revenue needs to be included in your OKRs
and how to do it right.
Including budgeted revenue in OKRs (Objectives and Key Results) is crucial for any company. OKRs are effective only if they help meet overall business objectives, including financial ones. However, a common misconception is that simply setting a revenue or EBIT target is enough to constitute a strategy.
Consider a typical goal like this:
Objective: Meet the budget.
KR #1 Total revenue is €2 million.
KR #2 EBIT is 10%.
This approach doesn't provide any learning or direction for the team. The most critical aspect of an OKR is demonstrating intent. What is the company trying to achieve? Setting financial targets alone doesn’t offer the context or direction that teams need to succeed.
The right approach to revenue OKRs
Including revenue in OKRs can be highly beneficial if approached correctly. The key is to answer this question: What underlying strategic direction justifies the belief that budget goals can be achieved? A well-crafted OKR centered on financial goals can provide all teams with clear direction on what products to build, what marketing should promote, and what sales should focus on.
Moreover, writing revenue OKRs in this way also communicates the level of ambition required. For example:
- Moderate Growth (5-20%): This can often be achieved by optimizing processes, focusing on a few new customers, and upselling to current clients.
- Significant Growth (20%+): This likely requires more radical actions, such as expanding the team, launching a new product line, or entering a new market.
To make revenue targets credible and secure buy-in from the team, it's essential to clearly communicate the strategic direction supporting these targets.
Examples of Strategic Revenue OKRs
Here are examples of how revenue-based OKRs can be structured to align with strategic objectives:
Example 1: Expanding Services into a New Market
Objective: Successfully expand services into new markets.
KR #1 Grow revenue from the current market by 10%, from €1 million to €1.1 million.
KR #2 Launch services in the German market with €500k in revenue.
KR #3 Launch services in the Belgian market with €200k in revenue.
Example 2: Launching a New Product
Objective: Successfully expand the product line with a new, one-of-a-kind salted caramel ice cream.
KR #1 Grow revenue from existing vanilla ice cream by 10%, from €2 million to €2.2 million.
KR #2 Generate €1 million in revenue from upselling the new salted caramel ice cream to existing customers.
KR #3 Generate €200k in revenue from new customers purchasing the salted caramel ice cream.
Summary
Including revenue in OKRs is not just about setting financial targets; it’s about aligning those targets with a clear strategic direction. Crafting revenue OKRs that reflect the company’s strategic moves provides teams with a roadmap for success. Whether the goal is moderate growth or a more aggressive expansion, well-written OKRs guide teams on how to contribute effectively to the company’s overall financial goals. The intent behind the numbers is what ultimately drives success.
