Many shops and small businesses use core sales performance metrics such as the number of monthly sales made and revenue as common benchmarks to measure success. While these are associated with the bottom line, they can be lagging indicators and don’t necessarily tell the whole story. In order to get a bigger picture owners tend to lean on traditional metrics such as activities and proposal generated.
When it comes to your business, it’s not just about where you’ve been, but where you’re going. While the number of sales or proposals generated last month doesn’t always provide a good indication of where you’re headed this month. But, with the right sales performance metrics, you can easily gauge the pulse of your business and make adjustments to keep your business healthy and humming.
Don’t Call Me, I’ll Call You
In this new digital era, sales happen differently. No longer do sales occur only by picking up the phone and making cold calls.
Think about it…when was the last time you responded to a cold sales call? Today, buyers are doing their research online first before talking to a sales person. With intelligent automation, it is now possible to reach people who are in research mode, driving leads inbound to your small business and talking to them only when they are sales ready.
The buying process has changed, but have you? If you haven’t changed the way you are measuring sales performance metrics and you don’t have insights into the process that drives sales, consistent revenue growth can be extremely difficult to sustain.
Modern Sales Performance Metrics
Whether you’re the captain of your sales team or have a sales leader in place, here are 3 sales performance indicators to gauge the health of your business:
1. Lead Conversion Performance – Lead Response Time
Today, marketing’s job is more than just designing fancy brochures; marketing is responsible for generating qualified leads and opportunities for your small business. The faster you can respond to marketing leads the better chance you have of setting the appointment and converting the sale.
In fact research shows that the odds of contacting a lead if called within 5 minutes versus 30 minutes drop 100 times. The odds of qualifying a lead if called within 5 minutes versus 30 minutes drop 21 times.
Smart tools such as marketing automation platforms enable you to nurture leads until they are ready to buy and automatically notify your sales team to engage with prospects when they are most interested – maximizing sales response time and increasing sales conversions.
Not only can you nurture leads into conversions with marketing automation, but you can also track lead source to learn about what’s working – and what’s not working – for your small business.
For instance, when you reach out to your leads to qualify them and don’t make contact, you can track them as “Closed Lost – [Reason Why]” such as “Closed Lost – No Response” in your CRM. This gives you valuable data to track back to marketing and better understand if you have a channel that may be driving unqualified leads or you have a sales response time issue that needs to be addressed.
2. Pipeline Opportunity Performance
In order for sales to happen each month they have to come through the pipeline. When you analyze your pipeline the key is look for ways to boost conversions. By tracking deals as they move through the pipeline you can measure sales performance metrics such as:
- Lead to opportunity: This ratio measures the effectiveness of leads converted into opportunities (deals). It can help you measure the quality of leads that you’re attracting to your business.
- Opportunity (Deals) to customer: This ratio measures the effectiveness of opportunities converted into customers. It can help determine the quality of your sales reps and the efficiency of your sales process.
- Average Opportunity (Deal) Value: Revenue amount assigned to an opportunity when it is created. This can help you forecast your revenue. So if you know that you consistently win 60% of the opportunities (deals) in your pipeline, you can predict your revenue for the upcoming month.
- Days to Close: How long it takes to move a deal from creation date to close. This metric gives you more accuracy in measuring the health of your lead channels. For instance, if your average days-to-close is 60 days, you know to evaluate a new marketing campaign 60 days post-launch (not 30 days) to get the most reliable picture of success.
- Probability to Close: Percentage chance you will close the opportunity. This gives you a better ability to predict sales and revenue for your business and to set sales and marketing goals each month. So, if you know that you close 60% of opportunities (deals) that you bring in, and you have a sales goal of 10 new customers for the month, you can set a marketing goal of bringing in 17 deals for the month.
- Days in Stage: Historical tracking of lead or opportunity by stage. This can give you data to see how long each stage of the sales cycle is, helping your team manage expectations and time. So if it usually takes 10 days to write a proposal and get a signed agreement back, your team can be prepared for when to expect a new customer to come onboard.
- Filters by Sales Rep and Lead Source: There are a number of filters within the pipeline that you should filter on to get the micro level metrics you need to make better decisions about your business. Maybe you’re spending money on a lead channel that never produces a customer. Or maybe you have a channel that converts at a high rate that you could invest more in. Or, maybe a sales rep needs additional training or better tools to help them convert more opportunities into customers.
These important data points are early indicators of future revenue for your business. For example what does your 3 month forecast look like? What would happens if you shortened your sales cycle by 50%? Or increased your opportunity to customer ratio by 10%? By understanding your sale pipeline metrics in depth, you have the ability to optimize your sales process and know which levers to move to drive more sales for your small business.
3. Customer Retention Metrics
Customer loyalty is often a metric used to measure the effectiveness of your support team. However in order for you to have the net customer growth year over year that you are looking for, you need to make sure you are attracting the right customer, signing the right customer, and getting them to stay and purchase from you.
One way to break it down is to look at the Customer Lifetime Value of your customers to better understand who you’re best and most profitable customers are. This gives you the insights you need to ensure you are spending your valuable sales hours each day with your ideal buyers and with opportunities that have a higher propensity to convert into lifelong customers – not just one time sales.
By knowing how your lead performance, pipeline metrics and customer retention data points you’ll be able to measure what matters – the metrics that lead to more sales and revenue.