As a sales manager or leader, your problem probably isn’t too little data. It’s too much data.
After all, with the latest tools, we can measure everything … and we do. Let’s be honest; it can be overwhelming. And when you’re overwhelmed, you can’t analyse the data, interpret it, and make a smart decision.
So what’s the solution?
Narrowing your focus. Rather than tracking everything, track the most important things. Not only will it be easier to understand the trends and their significance, but you can also execute your analysis more quickly.
So here are the 5 key metrics we suggest you measure.
1. Percentage of sales team hitting target
Target achievement, or the percentage of salespeople meeting or exceeding target, tells you whether your targets are too high or low. As a rule of thumb, your targets are almost certainly unrealistic if less than 60% are achieving them. It’s also possible that you need to hire better salespeople and/or fire the underperformers. Take a look at your commission plan structure to see if you’re pulling the right levers to get sales people to sell. Equally, if 90% to 100% of your salespeople are hitting target, then they’re probably coasting. Review your target setting approach; you may want to increase your targets.
2. Average deal size
Your average deal size is calculated by dividing your total sales value by the number of deals closed. Looking at this metric on a monthly or quarterly basis tells you whether your contracts are getting larger, smaller, or staying the same. If you’re trying to move upmarket, you want the average deal size to increase. If you’re trying to land more SMB customers, you want this number to go down (and your overall revenue and number of customers to go up). Average deal size can also help you spot potentially risky deals. Let’s say one of your salespeople adds an opportunity that’s four times larger than normal to the CRM. Not only is the probability of closing lower, but the sales process will likely take longer. You should make sure the other deals in this individual’s pipeline are pretty much guaranteed and that they’re not putting all of their eggs in one basket. Similarly, look out for any salespeople whose average deal size is significantly lower than the team average. This may mean they’re going after low-hanging fruit and need to push themselves to target more competitive or larger customers. Alternatively, they might be discounting too aggressively.
3. Conversion rate or win rate
Your conversion rate or win rate measures how the percentage of leads that ultimately become customers. If you get approximately 500 leads per month, and on average 50 buy your product, your conversion rate is 10%. This metric can help you calculate how many leads you need to make your revenue targets. For example, if your monthly team quota is £100,000, and your average deal size is £1,000, your salespeople need to close 100 deals. And if 10% of your leads become customers, you need 1,000 leads per month.
Historical conversion rates also show whether your sales people are becoming more effective. If the average win rate is increasing, and you’re closing the same or greater quantity of deals, then sales performance is improving.
If win rate is dropping, and your quantity of deals is flat or decreasing, then something is probably wrong with your process, team, and/or lead generation efforts. Keep in mind ythat our win rate will probably go down when you move upmarket. The shift from SMB to mid-market, or from mid-market to enterprise, always leads to a temporary drop in close rates.
Ultimately, revenue is your most important KPI. Revenue is simply how much money you received during a specific time period, including discounts and returned products,
Break down your revenue to see:
Percentage of new business (customers who have never bought anything from your company before)
Percentage of upsell/cross-sell/expansion (existing customers who are buying another product or upgrading to a higher tier or package)
Percentage of renewal (customers who are extending their contract for another month, six months, year, etc.)
Depending on your business goals, growing a specific percentage will be important. Maybe most of your customers are churning after the half-year mark; as you worked to improve customer retention, you’d want your renewal percentage to climb.
Or maybe you’re trying to improve your cross-sell rates. The second percentage is the one you’d want to increase.
It’s also crucial to review your hard numbers. If one percentage grows, the others will naturally lessen, but that doesn’t mean your new business revenue, for example, is dropping.
5. Sales funnel leakage
Measuring sales funnel leakage tells you where prospects drop out of your funnel at the greatest rates. To determine your leaky points, track stage-by-stage conversion rates. For instance, say 40% of new prospects agree to a discovery call. Half of those make it to the demo stage. Just 5% end up buying. That steep drop-off indicates your salespeople are likely A) not qualifying enough, B) giving bad demos, and/or C) negotiating poorly. Knowing these potential issues, you can observe them more closely to determine the true culprit.
By finding and improving these weak points, you can dramatically improve results.
Could your sales team benefit from understanding how to improve? Get in touch
Don’t forget to subscribe to get regular updates and ideas.