In this two-part article, I’ll cover important metrics to track for the overall sales force and the three major customer lifecycle stages that are Prospect Development, Opportunity Management, and Account Management. Selling is an activity that yields results and so it’s important to measure and track sales activities to know if and how sales goals are being reached. Metrics help sales leaders understand what’s working and whether or not the sales process needs to be refined.
In part one, I’ll focus on general sales metrics as well as what to track during prospecting. Determine the KPIs and CSFs for your company and direct your efforts to support your sales leaders in achieving them.
Let’s Get Focused on Overall Sales Force Metrics
Before we dive into Prospect Development, let’s define and distinguish between commonly used terms, beginning with what measures and metrics are.
Measures vs. Metrics
For the purposes of this article, measures are numbers or independent values that you can mathematically manipulate. For example, the number of full-time, quota-carrying sellers is a measure, as well as the total revenue they produce. Metrics are quantitative measures of activity or results used to assess, compare, and track performance or production. For example, the revenue per sales rep (often referred to as sales productivity) is a metric.
Leading Indicators vs. Lagging Indicators
Leading indicators are the measures or metrics that track activity that tend to forecast a result. For example, the number of meetings set and held, and the resulting qualified opportunities would be leading indicators to an account executive who receives leads in the form of appointments set by a sales development rep. Lagging indicators are the results (what leading indicators forecast). For the sales development rep, this would be the number of appointments set. For the account executive, it would be the number of opportunities closed and won.
KPIs vs. CSFs
Key performance indicators (KPIs) are metrics that indicate progress toward the achievement of pre-determined business objectives. Year-over-year (YoY) growth in sales productivity or operating income might be KPIs (or for the sales leaders, perhaps just YoY improvement in revenue minus SG&A, which are the things within their control). Critical success factors (CSFs) are the essential KPIs that an organization must achieve to reach its objectives. CSFs are very contextual and tied to organizational goals. A CSF for sales might include increasing win rates, quota attainment, cross-sell metrics, or new business acquisition, or decreasing discounts, loss/no decision rates, or customer churn rate.
From a performance consulting viewpoint, the highest and best use of sales metrics is:
- To determine whether things are progressing as they should
- Let you know where to drill down to diagnose root causes
- Guide you in taking corrective action as needed
If you have a business analyst team or robust sales ops/rev ops team, I will never argue against tracking and analyzing as much data as possible. But in many companies, leaders don’t have that luxury. Getting focused will help you, either way.
One of the most important measures of sales effectiveness is productivity. I most often hear sales productivity defined as “revenue per rep.” I prefer “the output of the sales force over a given time” (which can be a total or an average). It’s a complex metric to benchmark, so what’s most important is tracking the trend line inside your company. Is productivity increasing, decreasing, or remaining stable? And, are there logical and acceptable reasons why? If not, what diagnostic and corrective actions will you take?
Some define sales productivity as Efficiency X Effectiveness, which gets squishy for me (especially tracking those). Others mention the percent of time spent selling, but that is also a complicated metric to track accurately. Plus, some non-selling (or non-customer-facing) activities are valuable, such as call planning or researching. I’ll say this about efficiency and effectiveness: always start by becoming effective first, before becoming more efficient.
The next sales metric I want to clarify and explain is sales velocity. People often confuse sales velocity with sales cycle time, but velocity is a metric that combines multiple measures, including the average sales cycle. Sales velocity is like the mph of a sales force – it’s the speed at which a sales force produces revenue.
This tells you the speed at which your sales force produces revenue. You can get to the same place with “revenue divided by [time],” but that formula does not give you as many variables to explore to improve your outcome. With the above formula, you can further drill down into the opportunity number, deal size, win rates, and sales cycle, to see where you have opportunities to improve velocity.
Some tips: Use qualified opportunities (versus suspect deals) and the win rate for those well-qualified opportunities. Unqualified opportunities are noise in the signal. You can express the sales cycle average in days, weeks, or months to get the “mph” (sales velocity) figure that’s right for your business.
The caution I’d offer about sales velocity calculated this way is the use of averages. Averages can be problematic in a variety of ways. I’ve had some good online volleys recently with Hayes Davis, co-founder at Gradient Works (you should check out their newsletter), and Andy Davis (not related), head of demand generation at Attest. I do use averages, but I work with them purposefully and cautiously. Occasionally, I remove outliers or experiment with mean, median, and mode or convert to raw numbers for individuals or teams.
You can calculate sales velocity over any period for an individual product, the whole company, or a single region, division, team, or individual. This pliability is valuable in making comparisons. I recommend sales velocity to 1) look for indicators that improvement is needed, and 2) know where to probe more deeply.
Prospect Development Metrics
The first customer lifecycle stage I’ll focus on is prospecting. Many sales teams are probably measuring their sales prospecting stage, but which metrics matter most to track? If you are using sales engagement software (often referred to as a Sales Engagement Platform or SEP), you will have seemingly endless possibilities for tracking the effectiveness of your prospecting sequences through email, phone, and LinkedIn.
This sequence analysis of Prospecting Pipeline Activity or Sequence Conversion Ratios (approaches, contacts, conversations, conversions) is probably the best data you can have for prospect development. Marketing automation and SEPs will offer you the ability to track open rates, conduct A/B testing, and more.
You might also consider exploring lead sources to learn which types of leads are converting best for you. This analysis allows you to maximize the effective sources and seek ways to improve the others.
Failing all of the above and without the benefit of data from an SEP, I’d recommend at least tracking:
- Lead sources and the conversion between source and Initial Sales Conversion
- Conversion ratios for:
- Sequences that produce Initial Sales Conversations (to set an appointment)
- Initial Sales Conversations to Discovery Meetings (the first Discovery session)
- Initial Sales Conversations to Qualified Opportunities
- Discovery Meetings to Qualified Opportunities
- Use the Buyer Engagement Content during prospecting to correlate content to conversion, and when possible, to know what is working best. If you’ve built your content to address decision and exit criteria by persona, track it that way, as well.
Define and Track Your Key Metrics
Now that the distinction has been made between common metrics and indicators, sales leaders will have a better idea of which to track and how to use that information. For more information on this, tune in to my webinar with Sales & Marketing Management as I discuss these metrics in-depth. Learn how to improve sales performance by using insights from your most important metrics.
In the next article, I’ll continue to explore the metrics that matter most for a sales force, focusing on Opportunity Management and Account Management.
We’d be happy to help you solidify your sales measurement strategy on your journey to improving your overall sales force. Please feel free to message me directly with any questions.
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