Economically, times have boomed in recent years. But even in the best of fiscal periods, though, potential deals can be lost and revenues impacted when companies don’t monitor key metrics and follow logical processes.
This article provides a primer on key performance indicators, metrics to track, and what to do to ensure success, with tips from a variety of industry professionals.
Measuring The Sales Process: Setting Up Key Performance Indicators
The internet has helped usher in a new age for data and it’s no different with sales. These days, numerous potential key performance indicators, or KPIs, can help a business determine what’s working and what isn’t.
What To Do Before Creating KPIs
10 potential KPIs to monitor
- Client acquisition rates
- Competitor pricing
- Employee satisfaction
- Existing client engagement
- Net Promoter Score (NPS)
- New leads or opportunities
- Sales cycle length
- Sales volume by location
- System touches
- Rates of upselling or cross-selling
It can be a little foolhardy like putting the proverbial cart before the horse, to create KPIs before doing a few things.
For Khabeer Rockley, one of the early steps involves widgets. Rockley, founder and director of online sales trainer The 5% Institute, explains, “We have widgets on each blog post, catered for where they are in the buyers’ cycle.”
One widget, he notes goes to a free webinar registration, a low-barrier point of entry. Another widget offers a low-cost entry product, another point of minimal friction. For people a little further along in the buyers’ journey, who want a solution now, a third widget offers a training at Rockley’s average price.
“This makes it easier for people to buy depending on where they are in the buyers cycle, and secondly; makes each post a potential landing page,” Rockley says.
Scott Armstrong, business development director for digital marketing agency Banc, agrees.
“In terms of tips and hacks for closing sales at pace,” Armstrong says, “I think a fundamental step is taking the time to understand what a good customer looks like and then qualifying opportunities in and out based on their fit.”
Having a sense of purpose is also vitally important, says Kyra Schaefer, founder of As You Wish Publishing, which works with independent authors.
“I truly believe that to be fantastical at sales you must find your why,” Schaefer says. “Once you do, sales conversations become effortless.”
Knowing Which KPIs Are Right For Your Business
So many potential KPIs are out there. Here’s the thing, though: All of this -- all of business, really -- is somewhat subjective. A KPI that could be vital to one business might have little use to another.
Businesses, particularly in their early stages, sometimes come to success through a period of trial and error. Therefore, it might take time to determine which KPIs are most important for your business.
10 Essential Metrics Sales Teams Should Use
From the time a potential lead first shows interest in a company to the point they agree to do business (and beyond, really), there are numbers worth paying attention to in the sales cycle.
Here are some metrics to be cognizant of.
Average sales cycle length, according to Geckoboard.com, is a metric that looks at “the amount of time from your first (contact) with a prospect to closing the deal, averaged across all won deals.”
Knowing how to calculate average sales cycle length can be useful for everything from forecasting sales to knowing what to expect from sales personnel. But the average sales cycle length can vary for different businesses, with, as Armstrong notes, a range of factors affecting the duration of the cycle.
“The average sales cycle for our type of business tends to be three months, but can be more or less depending on the nature of the contract and our relationship to the prospective client,” Armstrong says.
Geckoboard noted the average lead to close time for business-to-business companies is 102 days. That said, times can vary widely among different professionals.
In general, smaller B2B deals will often run around three months. Larger and more substantial sales might need six to nine months.
On average, leads take approximately 42 hours to respond, the Harvard Business Review noted in 2011, with companies sometimes having a very short window with potential customers.
Still, that doesn’t necessarily mean to ditch leads not quickly responding. Joseph Cirillo, co-founder of Cirillo Financial Services LLC, a New Jersey-based insurance coaching service, says some agents wrongly give up after the first call.
“Some people won’t answer your call until call 3 or 4,” Cirillo says. “We have a twelve call sales cycle before we exhaust a lead.”
Meanwhile, Tony Caldwell, President of You Drive Auto, has his small used car dealership follow a four-step funnel process for customers, from looking to reaching out about specific vehicles to visiting the dealership to following up with unsold prospects.
Lead To Opportunity Ratio
Not every lead will become a sale. In fact, not every lead should become a sale. Some potential customers desire products or services well beyond the scope of a company’s area of expertise. Other leads aren’t willing to pay anywhere close to what a project will need to turn a profit.
So a less than 100 percent closing rate is not only normal but desired. What’s a good closing rate to shoot for? A study by Implisit, a subsidiary of customer relationship management giant Salesforce, found that on average, about 13 percent of leads get converted to opportunities. Of the different sources of leads, ones off referrals or the company website tend to convert at the highest rate.
Opportunity To Win Ratio
This measures the number of sales that result in wins for the seller. The same Implisit study that looked at conversions found that about 6 percent of qualified leads resulted in wins.
There are, of course, ways to improve upon this ratio. Tom Buckland, managing director and founder of Ghost Marketing, a digital marketing and search engine optimization firm, says it can take 4-6 months for companies to begin seeing the benefit of his services.
“This results in us having to work a lot and usually for a while on reassuring the prospects of success, and ultimately getting them to commit to a yearly contract,” Buckland says.
Sales Close Rate, Per Industry
Some time ago, inbound marketing giant HubSpot looked at closing rates for 8,900 companies representing 29 industries. The results showed, across the board, that companies tend to have far more opportunities than they close, with a 19 percent closing rate across all industries.
Industry averages don’t have to be the rule, however, with many tips and hacks available. Casey Hill, a sales manager for SaaS firm Bonjoro says his firm has experienced “tremendous success” by incorporating personalized videos into deal closes.
“We find that in today’s world personalization is going by the wayside and we are trying to bring that back to sales conversations,” Hill says.
Max Babych, CEO at SpdLoad and IT and development firm, puts it in simple terms.
“Stop selling,” Babych says. “Start advising and giving value.”
At every stage of the buyer’s journey, the potential exists for a deal to be lost. Loss rate by sales stage tracks this.
Certainly, this rate can plague businesses. Cirillo notes how the longest part of getting a customer set up with a life insurance policy is scheduling their medical exam and ordering their medical records.
“This process can take months in some cases, and many people fall out of the process at this point,” Cirillo says. “For every four applications you submit, maybe 1-2 will make it to the end and buy the policy.”
Cirillo recommends accelerated underwriting with no medical exam.
Many variables factor in here, from the target company size to the age of the market. But the chief determinant might be deal size, with SaaS Metrics noting that deals in the $2,000 range should close within two weeks while deals over $100,000 might take three to six months to close.
What to aim for: At least 90 percent of your reps using your processes, according to Sales Benchmark Index
Ensuring that all members of a sales team are following a company’s processes can be critical, notes Alexander Kehoe, co-founder and operations director for Caveni Digital Solutions.
“In the digital marketing industry, we have to be very targeted in our sales as the average ticket at the agency level can sit roughly around $10,000,” Kehoe says.
Kehoe helps ensure uniformity of process by automating much of the initial prospecting and outreaching to clients, essentially everything before they talk to his team.
Zac Kerr, chief strategy officer for SaaS firm SalesRabbit recommends making things easy for sales teams.
“Reducing data entry and simplifying the process for sales reps will allow them to spend more time prospecting and closing deals,” Kerr says.
Good businesses often try to sell value rather than price. This is partly because competent labor is not always easy to come by.
Adam Mitchell, who owns a real estate investment company We Buy Houses Fast in Dallas and makes an average profit of $40,000 per remodel, admits frankly, “If I had more subcontractors that I trusted, I could do more projects.”
Therefore, tracking whether deal sizes are growing is one good sign of a business’s health.
Accuracy Of Forecasts
What to aim for: Within 10 percent, according to Sales Benchmark Index
We’re not talking about businesses being able to predict their revenue for the year, per se, as many factors beyond company control can affect this. This is more judged on a per-project basis. Are businesses able to give accurate quotes to customers and do the things they say they’ll do?
This is a bigger problem than might be apparent.
“Many of the customers we talk to have been involved in deals with other marketing companies that they were not satisfied with,” Kehoe says. “So we try to offer transparency in how we would handle their campaigns differently.”