Hone In On The Right Sales Indicators
A lot of sales leaders like to talk the sales metrics talk. But, do they know how to walk the metrics walk?
It is easy for a sales leader to claim that they track their sales team’s metrics. But, are you tracking the right numbers? Are your sales reps aligned to those numbers?
Many organizations look at Wins, Win Rate, Revenue, etc. These are lagging indicators, meaning it is typically too late to make a change once these numbers become measurable. For example, let’s say your sales process is six months. A sales leader could have had a rep performing poorly for more than six months before they realize the rep has not been working effectively in that sales environment.
Leading Indicators As Sales Metrics
The metrics you need your sales team to align with are leading indicators. These leading indicators can be measured in real-time and, if changed, can impact business results. This is the thought process behind those that believe in activity-based selling: the idea that sales are a cascading, repeatable chain of controllable behaviors and events that lead to a defined outcome.
A sales organization that is fully aligned around these metrics will make better-informed decisions on where to allocate time & energy. With these insights, sales organizations will know how much of their resources will be required to allocate to each activity in order to reach their prescribed goals.
Let’s look at an example. My yearly quota is $12 million. I need to sell $1 million a month. My average sale is $250,000. I need to close 4 deals a month to hit $1 million. My average close ratio from demos to wins is 25%. By working backward with these numbers, I now know that I need to be doing 16 demos a month. Also, my close period from Demo to Closed is 3 months. If I perform 16 demos in the month of October, I should expect to see 4 deals close in January for wins at an average of $250,000 leading to my $1 million monthly goal.
These are all averages, but, if I can maintain that activity over the long run, we should see one of three things happen.
- My averages drop: I will miss my number and need to be coached on improving my performance.
- My averages are correct: I will hit my number.
- My averages increase: I will blow my number away and my manager should work with me to see what I am doing and if it could be used by other people on the team.
If these numbers are available in real time and the activities that you are tracking start at the introductory call and work through the funnel, you should see the averages adjust after every activity.
Measure Sales Metrics By Activity-Based & KPI Selling
Once you have decided to move forward with activity-based selling, you will need to create the alignment with your reps. The following four steps will help get you started:
Open communication - Do not force the metrics on your team. Unless, of course, you like tyranny. Make sure you provide an open, interactive program where your reps will be heard and feel valued. Make sure they see the metrics as:
A. An instrument to help them meet their end goal
B. Trackable and monitored on a consistent, regular basis
C. Legitimate data to prove they are headed in the right direction
Ask for feedback – the more your reps are involved in determining the KPIs (key performance indicators), the more they will buy in. Keep the KPIs to three or four key measurable metrics. Any more than that and you risk diluting its effectiveness.
Develop scorecards – Every good athlete knows the score. Down by three with four seconds left, LeBron knows he needs a three. Your sales reps are like professional athletes and need to know the score. Your reps need 24/7 access to the scorecard. In addition, the scorecard needs to be used at every one-on-one meeting and during any team sales meetings. If sales reps are failing to meet certain activity numbers, you will know what coaching they need. If their averages are dropping, you can course-correct immediately.
Speaking of course-correcting – monitor and course-correct. Reinforce the importance of KPIs and have your scorecard visible for all to see. A public display also demonstrates your team’s focus on metrics to the rest of the organization. The scoreboard will show you when you’re falling behind and you will know what you need to do to get back on track. When your team is falling short of a certain goal, you can quickly rally the team around it with contests or incentives.
Starting with these four simple steps, you are well on your way to creating a sales activity-based sales force who will be infatuated with KPIs. You'll be able to talk the talk and walk the walk of sales metrics in no time. Salesforce and this blog post on 7 Sales Performance Metrics can help you get started on choosing which metris to focus on.
Good luck and happy selling!