8 out of 10 entrepreneurs who start businesses fail within the first 18 months. Only 4% of the 28 million companies in the US ever reach more than $1MM in revenue. Of those firms, only 1 out of 10 (0.4% of all companies) ever make it to $10MM in revenue. Only 17,000 companies make it to $50MM. The primary reason that entrepreneurs fail is because they don’t have real-time metrics and dashboards to navigate through their entrepreneurial journey. Since entrepreneurs are flying blind, just like a plane without instrumentation in the cockpit, the businesses crash and burn.
The management products that are available in the market function in silos and are very hard to integrate and customize. There exist companies like Domo, SiSense that provide dashboard capability; products like QuickBooks, InAcct provide accounting capability; Salesforce and InfusionSoft provide both Customer Relationship Management (CRM) and sales force management, while Basecamp and Microsoft Project provide project management capabilities. However, none of these are fully integrated. They do not provide Actionable Information (AI).
I founded Rhythm Engineering in 2005 in Lenexa, KS. While I have founded other businesses earlier in my life, this was different: I was investing heavily into a technology product that needed expertise in several disciplines. The hard work paid off. The product was launched in 2008. It was a huge success. We began to scale quite rapidly.
We crossed the magical $1,000,000 annual revenue mark in less than two years and grew from $227K in 2007 to $7.8 Million in 2010. A whopping 3389% in 3 years! The Magazine, Inc., ranked us as the 64th fastest growing company in the US.
Rhythm Engineering has consistently grown by double digits every year and in 2014 saw a whopping 83% growth.
There were multiple challenges in this journey. Along with exponential growth comes the desperate need for cash. Hiring personnel, building up operations, developing systems/processes and training sales people while building marketing collateral, the list of things to do goes on and on. The biggest challenge during this journey was the fact that I was missing a system where I could measure and manage all these processes, projects, and systems without losing sight of the available cash. I was using QuickBooks for accounting, spreadsheets for financial projections, QuickBase and Salesforce for sales automation and CRM.
I integrated operations into Salesforce and still my accounting could not talk to Salesforce. Of course, I could spend a couple of hundred thousand dollars on custom software development to integrate Salesforce with QuickBooks, but I didnt have the money to spare. Even if I integrated them, it was impossible to create financial projections and see the relevant information that I wanted constantly tracked on a single dashboard.
I scaled Rhythm Engineering using the 5 Dial Method. Interested to know what my 5 Dials are? Read on¦
The 5 Dials
I learned about the concept of 5 Dials from Dan Sullivan of Strategic Coach®. Dan taught me that even for a jetliner, the pilot could only keep his eyes on a maximum of 5 dials simultaneously. It is never more than 5 dials. The pilot can always drill down deeper into other dials when he notices an issue with any one of the 5 dials he is monitoring.
My Dial No. 1: Cash Flow
Cash is KING. I needed to know how much cash was coming in and how much money my business was burning. I knew that if I lost sight of my cash position, I would crash and burn my business. I also needed to know and control where cash went.
My Dial No. 2: Marketing Funnel
Marketing funnel is the leading indicator for the health of a sales funnel in the future. The marketing funnel dripped qualified leads into the sales funnel. If the marketing funnel was thin it was easy to predict that sales will flag in the near future. As a business leader, I had to keep a close eye on the health of the marketing funnel.
My Dial No. 3: Sales Funnel
My sales funnel helped me predict how much cash was coming in. It also helped me predict and prepare dry seasons. My sales funnel had to be integrated with the accounting and financial reporting. Having Salesforce managing the sales funnel and QuickBooks handling the finances did not work for me. Ugh!
My Dial No. 4: What-If Analysis
This was one of my favorite dials. I would take current sales information, cash burn rate, and change parameters like increasing personnel expense or increasing revenue to see its impact on profit. This dial/tool has been indispensable for me to manage business growth.
My Dial No. 5: Profit and Loss Statement
Profit and loss statement gave me a picture of the revenue and expenses of the company. It gave me a clear idea of how much money was coming in (revenue), where I was spending it (expense), and how much was left over (profit/loss).
My problem was that there was not any one system or software that gave me all this information in one place. All the software that I used functioned in a silo.
I spent many nights wondering how I could integrate the information from the 5 dials into one software system. I applied the same process I used to drive the growth of Rhythm Engineering: approaching a complex problem by clearly identifying the problem, developing a solution through hard work, and utilizing a talented team, and a series of trial and error tests and modifications.
After months of research, searching for a program that could address all my needs, I was completely frustrated. No single program was available that could address all the 5 dial requirements. This frustration led me to the final decision: I had to develop my own software solution. It was the only way I could address all the individual business challenges I wanted to closely monitor and analyze.
By combining these 5 dials into a single software/SaaS package, I was able to solve my problem. I had created a single software program that allowed me to incorporate all 5 dials into one complete package. I brainstormed ideas for a name and ultimately landed on the name Kakkuro as it is a perfect word to represents the impact that this software could play in success of any business.
The beauty of Kakkuro software is that it is the only one-stop solution that provides entrepreneurs with real-time actionable Information via intuitive dashboards to navigate their businesses by seamlessly integrating CRM, Project Management, and Accounting modules. Kakkuro will help entrepreneurs succeed and grow their businesses.
– Reggie Chandra