To improve your sales team’s efforts, you need to keep an eye on your key performance indicators (KPIs). At a first glance, measuring sales appears very simple – just look at the results, right? While it’s true that the achieved business result is easy to measure, the difficulty lies in knowing how we got there and how to improve moving forward. How much could we sell for if we organized sales efforts better? Are we leaving money on the table? Which levers can we pull?
There are 5 fundamental sales metrics you need before you get into more details. To provide individual sales coaching, you also need these metrics on an individual level. If you have teams moving volumes of transactional sales and a division selling complex solutions, don’t mix the two.
1. Average Deal Value
What is the average value of the sales opportunities you have won? How is this number trending over time?
Definition: Sum of all won opportunities / number won (number)
2. Win-Rate (opportunity to close)
Of all the opportunities created, how many do you win? This shows the effectiveness of your sales efforts. Low win-rates can have many reasons. Are you going after the right type of prospects? Are your sales people identifying and speaking to the right people? Are they able to convert your capabilities into business value for buyers?
Definition: Number of won opportunities / all opportunities created (%)
3. Sales Cycle (opportunity to close)
How long does it take you from initiating a sales opportunity to closing it? This one is a bit trickier, as we need to find a clear-cut definition of when an opportunity is initiated. Disciplined qualification is critical, as you don’t want your sales funnel to be filled with opportunities unlikely to be won. Client-fit, sales triggers and chances of winning need to be determined before initiating a sales project. How stringent you are will depend on the complexity and time needed to be dedicated on each opportunity.
Definition: Time between opportunity creation and closed/won (months)
4. Weighted Pipeline (monthly)
Your weighted pipeline is the value of all opportunities in the pipeline, adjusted with the estimated probability of winning each deal.
Be careful setting probabilities based on over-simplified rules, like the phase they are in or just the subjective feelings of the sales person. Always weigh probability using a formalized rule-set, preferably based on buyer-focused milestones defined within the sales process. Reduce the probability on opportunities that have not progressed in a certain time, or where crucial sales process steps have been skipped, making them less likely to be won.
Definition: (monthly target / win-rate) x sales cycle in month
5. Activity Levels
When you know the number of opportunities needed, you can break down the activities needed to progress opportunities. Also keep track of the time needed to complete key activities to figure out if there’s enough selling time available to drive the amount of opportunities needed. And figure out which activities move the needle more than others. When you’re down at this level, you can look at ways to increase the efficiency of specific sales activities to get more out of each day.
Definition: Depends on the activities
Bonus tip: Funnel Leakage (Stage Drop-Off Rates)
Keep a close eye on when opportunities fall out of your sales pipeline, as it can tell you very interesting information about where you’re having difficulties. Are you losing a lot of deals in the last stage? The first interpretation of this could be that your sales people are “poor closers” and need training in this regard. The more likely problem is their lead to opportunity qualification process and early stage behaviors and actions.
With an up-to-date sales process used in daily operations, all of the above KPI’s will be easy to track and coach from.