Setting successful sales KPIs

Tips on setting successful sales KPIs

The challenge of small business is that you are often so busy that the first indicator of success (or failure!) is the sales results for the month/quarters. The ideal situation would be to know where you are tracking before the pleasant (or unexpected!) surprise. Having a simple set of KPI’s for your sales person will positively impact this requirement.

Some stuff you need to know about sales KPIs …

When we talk about KPI’s, it’s important to note that there are lagging indicators and there are leading indicators.

Lagging indicators

Lagging indicators tell sales managers how they have been doing by looking at output and results “after the fact.”

Lagging metrics can include:

• Sales – 80/20 rule

• Gross margin

• Gross margin %

• Number of customers

• Churn rate

Lagging indicators focus on past performance. They usually get the most attention in SMEs because these are the types of numbers that get reported to the Directors and/or Shareholders. These indicators need to feed into the overall financial objectives of the business.

Leading indicators

Leading indicators focus on the likelihood of achieving goals and what might occur in the future. They’re a bit like a signposts along the road. Leading indicators are activities and actions that can be tracked or measured during the sales process as your sales person’s opportunities are being developed and the pipeline is being built.

Leading indicators include activities like:

           • How many calls should a sales person make?

• How many prospects does a sales person visit?

• What types of prospect is the sales person calling?

• How many of these calls turn into opportunities?

• How many of these opportunities turn into wins?

If you really want to make a change to your sales the leading indicators are the best indicators to focus on.

Start to observe the relationship between the activities and the actual sales and you can then adjust the activities that are most important. You might then adjust your sales person’s targets accordingly.

(Please give me a call to ask for a copy of a KPI sales grid. I can tailor this to your business.)

Three fundamental principles:

Tracking KPI’s via leading indicators will give you clarity about the road ahead, allowing you to see potential “bumps” ahead of time.

1. Don’t focus on too many KPI’s at a time. Prioritise certain KPIs to focus your sales person on the desired outcome.

2. Make the KPI’s visible and review them regularly in team, 1:1 meetings and Director Meetings

3. Allow your new sales person at least a 2-3 months to settle in before you go through the process of setting up their KPIs. They need to take ownership of their indicators. Time in the business will help them to understand the detail of what makes their role “tick”.

Further food for thought…

·        The best performing sales teams are ones that are able to break their sales process into individual, measurable activities. You will find that most sales happen as a result of predictable activities, and a decline in sales is usually down to neglect of these activities.

Below are some KPI’s that are interesting to follow. They will also assist your sales manager with understand how their sales person is performance across the stages of the sales cycle:

1.      Average number of days in each opportunity (what opportunity is about to close therefore what can I forecast?)

2.      Stage to stage conversation ratios (great for highlighting coaching priorities)

3.      Opportunity to close ratio (who’s good at opening doors, who’s good at closing?)

·        Boosting sales productivity in a B2B environment

                      1.      Enable your sales person with the right content at the right time

2.      Support the rep with just in time coachin

3.      Identity opportunities for improvement in the pipeline

4.      Establish a feedback loop between sales and marketin

·        Consider setting lagging indicators that surpass those written in the sales person job description. Incentivise the sales person based on stretch revenue targets.

·        Set KPIs that are SMART: Specific, Measureable, Attainable, Realistic, and Timely.

·        Sales team KPIs should feed-off the over Business Objectives. Make sure that they are streamlined.

·        Include your sales person in the process of setting and signing off their KPIs

·        Set consistent KPI measurements and targets across the people in your sales tea