Manage your sales team effectively with the right KPIs
It’s difficult to lead your sales team to success with the wrong KPIs. And most KPIs aren’t measuring the right things. There are two big problems with sales KPIs today. They measure too many things and most of those are the wrong things. Just because you can measure something doesn’t mean that you should. So, let’s figure out what you should measure.
Start figuring out which KPIs matter most by studying your Funnel (The data in your CRM). You should have the sales process mapped accurately in the CRM and make sure that everyone is following the rules. Once you do that, you can begin to understand what you need to measure along the way. After you have done that, you can think about creating KPIs for individual sellers.
What to consider:
Conversion rates at each stage
Total number of leads at each stage
Ratio from MQL to SQL to Close
Individual Seller KPIs
Number and value of leads in each stage of the funnel
Average number of days from qualified to closed
Length of time each lead sits in each stage
Every lead has a specific next action or task
3/4s of leads have a meeting scheduled with client.
Percentage of leads lost at each stage
Number of days since last contact
Note: All of this measurement requires that the sales reps actively use the CRM following a consistent set of rules and keep the data accurate, complete and up-to-date.
You can work backward from sales goals to KPIs if you understand you funnel ratios (stage-to-stage), what each sales role is responsible for, and what actions lead to the right results.
Understanding the Funnel
Your funnel maps the progress of leads through the marketing and sales process. Some companies have separate sales and marketing funnels, and some combine them. For the sake of understanding the progressions, let’s combine them for now.
It’s important to understand that only a small percentage of leads will make it from the first stage of your funnel to close. The ratios are important. You will need to be clear about how many leads are needed at each stage in order to close enough deals to hit your sales goal.
Let’s say your marketing to sales funnel goes like this: Engage, Download, Marketing-Qualified, Sales- Qualified, Cultivate and Close.
Calculate the loss ratio at each stage, and how fast leads typically go through the funnel. Once you know those ratios, you can calculate how many leads are needed at each stage to hit the sales goal overall, and for each product.
Let’s run through an example: For product 1, how many leads need to go in the top of the funnel, for one to come out the bottom? We can work that backwards. For one to close, we need at least 4 in Cultivate, 7 in SQL, 10 in MQL, 20 in download and 100 in engage. Next you can figure out how long leads typically stay in each stage. The speed from stage to stage is the velocity. That could speed up or slow down at different stages.
Some leads don’t come through marketing. Sellers may prospect in existing accounts, get referrals or cold call. These leads will have different close ratios and velocities.
What to Measure
The first and most important thing to measure is if there are enough leads/opportunities at each stage of the funnel to hit sales goals. If your sales goal is $10,000 per quarter, your average sale value is $2,500, your sales cycle is 12 months, and your sales ratio is 10 prospects to one close, then you can figure out the math from there.
At any given time, the funnel needs to look like this:
Second, are things moving through the funnel at the right velocity? The KPI around that might be based on average number of days from sales qualified to closed. If the average is 12 months, then the average should be around 365 days.
Those measures may be the most obvious, but there are some other key KPIs that matter. Many companies measure the number of calls or emails. While that may matter if you have SDRs or sales reps who are cold calling, that number is less important once a lead is qualified.
Once a lead is qualified, it is important to track the next actions. Every lead must have at least one next action planned. That next action should be very specific. “Follow up” doesn’t work because if a rep is working on 100 leads, they won’t remember exactly what to follow up about. The next action needs to be a specific action, ask or deliverable.
Another measure is how many qualified opportunities have the next meeting or phone called scheduled with the client. If the client hasn’t agreed to a next action, chances are, the next meeting will never get scheduled.
- Number of overdue tasks or actions
KPIs should include:
Number of leads/opportunities at each stage.
Ratios of each stage
Number new leads sales reps add each week/month/quarter
Percent of MQLs that become SQLs
Percent of SQLs that transition to Cultivate
Number of close dates up to date
Number of opportunities in the right stage
Number of opportunities with next actions associated
Time from receiving lead and taking action
What good KPIs tell you:
If you are measuring these KPIs constantly, you will identify problems that you can find solutions for and possibly set new KPIs around.
You will quickly see if there are too few leads coming into the top of the funnel either through marketing or seller activity. If that happens, you can look for solutions either in marketing or with seller lead generation. Focus less on number of calls and more on activities that bring in more leads. Referrals may be a better rout than cold calls. Find what works best for each sales rep.
If too many leads fall out at Qualify, it is possible that marketing is attracting unqualified leads. If that is the case you will need to work with them on attracting the right leads.
If too few are getting qualified out, the ratio between Cultivate and Close will show that. Better to qualify out early than waste time on unqualified leads. That often happens when too few leads are coming in the top of the funnel.
Lagging vs Leading Indicators
One of the reasons we have KPIs is so we can make sure that employees are doing the activities that deliver the desired results. For that reason, when it comes to sales, we often measure success around number of activities with the assumption that if sellers do certain activities, we can count on certain results. 50 calls a day will deliver the right number of meetings to get the right number of closed deals.
The problem is that the quality of the work done is as important as the quantity. By watching how leads flow through and individual sellers funnel, you will have a good handle on their chances of success.
Leaders are often afraid the funnel-based KPIs are more like lagging indicators than leading indicators. That is only true if your team is focused on the bottom of the funnel and what is closing. If your are managing your team around the funnel and the KPIs fit the funnel, you will be able to see trouble coming.
Managing your team around the funnel and the progress of leads through the funnel will help you get the sales results you are looking for. At any given time, you should be able to see if a seller has enough in the funnel to hit their goals and whether they are doing the right activities to get the results needed.
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