What Gets Measured, Gets Improved
In our data driven world, there is so much information, that sometimes it is difficult to decide what is best to measure when it comes to managing your sales function.
Before we get into what to measure, it is even more important to talk a little about the accuracy of the information. Making a decision based off of inaccurate sales information can be more detrimental than making it off of no information.
When you make it off no information, you know it is a gut decision, but when you think you are making a decision off of inaccurate data, it can be difficult to know what has gone wrong. This is why it is critically important that whatever you choose to measure it needs to be easy to do, and you need buy in from your team.
A second thing to consider in choosing the things you want to measure, keep in mind you want the data to provide you with actionable information.
Here are six key performance indicators or sales measurements we recommend you put in place, at least to get you started:
- Performance to Sales Targets – Setting sales targets is critical to your sales performance. When a target is established, it provides an idea of the amount of effort required to meet those goals. It you find you are not meeting targets, it allows you to ask questions such as, “Am I putting enough resources in sales?, “Am I reaching or attracting enough leads?”, “Do I have the right people involved in the sales process or do they need additional training?”
- Lead Conversation Rate – Also known as the win/loss ratio. This measures the number of leads that convert into sales. If you find the ratio to be low, it is time to ask questions like, “Am I attracting the right leads?”, “Is there somewhere in my sales process where people are getting stuck?”
- Sales Cycle Time – This one measures the time from when you identify a lead until they convert to a sale. Some leads might convert quickly, while others may take a little more time. This looks at the average and allows you to start forecasting future sales, based on the leads you have. If you want to shorten this time, you can ask the questions, “What is the difference between the ones who convert quickly and the ones that take more time?”
- Follow-up Rate – This one measures how many contacts you need to make in order to convert a lead to a sale. While everyone would love to be able to complete a sale on a first contact. In fact, this rarely ever happens. Even in those where this does appear to happen, it could be that they have become familiar with your brand or product, prior to being contacted. By analyzing follow up, you are able to start looking at how to purposely build in touch or contact points.
- New Business vs Upselling – While everyone loves the excitement of new business, it is generally much easier to convert a happy existing customer. New business generally takes a lot more time and effort, thereby costing you more for each sale. Existing customers are easier to sell to because they already know who you are and will be more willing to take the risk on something new. By looking at this ratio, it helps to ensure that your are balancing the cost of sales over the two different types of sales, thereby flattening out your gross margins.
- Leads By Source – This one measures where you are getting your leads and then allows you to correlate success by source. In measuring this, you are able to put more of your efforts into the activities that bring you the greatest amount of success. It helps you get clear on your marketing and sales channel effectiveness.
Putting in place some simple metrics helps to make sure you are working smarter, not harder. If you find that your current activities seem a little scattered and are not yielding consistent results, maybe it is time to take a step back and implement a couple of metrics to keep you and your team on track.
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