When sales leaders look at their sales team success they often only key in and look at the actual sale. The sale or the closing of a prospect is of course important – but it is only one piece to the puzzle. Sales leaders have to look at Leading, Lagging and Real Time indicators when they are evaluating sales performance of their teams.
The closure of the sale is a lagging indicator and unless you are closing sales daily, you could already be in trouble.
So how do we as sales leaders create effective indicators that assist us in evaluating the behaviors required today for sales tomorrow as well as into the future? The answer is the utilization and management of Key Performance Indicators or KPIs for short, specifically by managing the following three indicators, Leading, Lagging and Real Time. These key three will ensure you have a healthy sales funnel and future business. They provide an objective form of measurement that if done correctly allows you to see into the future allowing you to change direction swiftly or solve roadblocks within your team.
To effectively implement these KPIs as a sales leader you will need to determine how you will measure them correctly is to clearly differentiate with your team what a sales pipeline is and that of a sales forecast. A sales funnel provides clear visibility into all of your opportunities, regardless of their probability of closing, whereas a forecast is a subset of the pipeline that only includes qualified opportunities that are expected to close within a defined period.
A properly defined funnel and its sales stages help you organize your sales process and create effective tools and benchmarks for your sales team, making it easier to forecast the future success of your sales team. In fact, using KPIs, you’ll know not only how your team is currently performing, but also what roadblocks they are encountering.
Implemented correctly a sales forecast becomes yet another forward planning tool you can use for budgets, spending, lead conversion success, cost per lead, and help you appropriately and accurately predict your revenues.
Every sales leader should measure the following:
Leading indicators – Funnel development
• Sales cycle length
• Number of qualified leads in the pipeline
• Proposals to qualified prospective clients
• Total length of time to qualify a new prospect
• Number of new (first) client meetings per month
• Cold calls to qualified prospect ratios and conversion rates
Sales leaders need to not only measure their teams opportunity-to-close ratio’s but also the conversion from each stage of the sales process. Keeping an eye the length of your sales cycle, the number of new client meetings you have each month, and the conversion ratio of new leads to qualified leads will provide insights on whether you will be ahead or behind your companies sales goals and how you can best adjust them quickly and effectively when needed to ensure the accomplishment of said goals.
Lagging indicators: Quota focused
• Number of sales per quarter and year
• Proposal to closed ratio
• Average sales size
• New clients versus existing clients
• Annual sales quota
Real time indicators: Client management, retention and growth
• Average client growth quarter over quarter
• Client retention rates
Depending on your particular business, you may need to have additional KPIs. A payroll company might measure checks cut per client.
The best sales leaders rely data when establishing KPIs. Each KPI should have an appropriate benchmark that is based on actual data derived from past sales history or if you are a start up or relatively new company utilize benchmarks from your particular industry. Review your sales from prior months, quarters or years to assist you in calculating averages and quotas. Knowing your average deal size and then combining that with lead conversion rates will give you a very accurate idea of how many opportunities your team will need to have in the funnel in order to exceed your sales quotas in a very objective and process driven way.
Once your measurements are established they are only helpful if they are used. Know each of your KPIs, and review the data weekly. Manage the system and watch for any trends-both worsening and improving so you and your team can react appropriately. It’s vital to include your sales team in this process; review each person’s KPIs once a week in your coaching session. This will help them to understand what is important and help them see any issues in their performance early and allow them to make adjustments quickly based on data.
KPIs allow sales leaders to more accurately predict the future of their sales team, their goals, and training needs that will ensure success.
Bret J. Brockbank is a management and leadership expert with skills in sales, operations and human resources developed from years of experience all while delivering bottom line results.