Key Performance Indicators: Choosing the right sales metrics for your business

Large, complex organisations run the risk of losing sight of their goals. Here’s how you can start selecting the right Key Performance Indicators for your sales activities.

Key Performance Indicators (KPIs) are the bread-and-butter for goal tracking in every modern organisation, but which ones you choose and how you use them could make all the difference when it comes to defining your success.

Not all KPIs are equal, either, and that means different industries and even different teams within your organisation should have a different set of goals to chase. In this article, we’ll look at some of the KPIs for sales success, and how you can make sure your teams are making the most of them.

Step One: Detail your sales pipeline

Before launching into creating KPIs, you’ll first need to develop a picture of your entire sales funnel — that’s the entire sales journey from prospecting to closing the deal, also known as your sales ‘funnel’ — and it’s this picture you’ll be creating KPIs for, just like a series of checkpoints in a long distance race.

While there’s no ‘one-size-fits-all’ approach, the vast majority of sales processes will conform to (roughly) these four-to-six stages:

1. Prospecting or lead generation — this is the stage at which a customer reaches out to your business, provides an expression of interest in your services, or perhaps they’re referred to you by an existing happy customer. Because it sits at the top of the funnel, we can expect this segment includes the largest numbers of entrants (and dropouts), so prepare for your KPIs to include some large numbers at this stage
2. Qualification — now that you have prospective customers, you want to begin asking questions or providing them with information that helps them understand whether or not your offering is suited to their needs. Qualification can be a long process, but it will help you better understand where your prospective customer fits within your product or service matrix, and therefore tailor a bespoke offer just for them
3. Proposal — in a traditional sales framework, this is your first attempt at making a bespoke offer to your now qualified lead. Perhaps you have three options at different price points and levels of quality or service to show them, or perhaps you’re providing a specific quote tailored for the job they need done. Either way, if the job of sales has been done right up to now, you should be very close to sealing the deal
4. Post-proposal — whoops, you jumped the gun. This is a contingency sales phase wherein you don’t progress to a commitment after your initial proposal and more qualifying work needs to be done before you come back with an amended proposal. Don’t worry, so long as your offering is right for the prospect and you manage to maintain a dialogue, you’ll eventually make it to the next stage…
5. Commitment — so your qualified lead is now indicating they’re ready to sign the deal. Now is the time to reiterate any terms and conditions, confirm you’re fully aware of their needs and hand over the documents of sale (or whatever the mode of transaction might be in your business’s case)
6. Sale — You and your team have closed a sale! Time to process the sales order and ring that bell. But while the job of sales may be done, the task of account management and aftersales service is only just beginning. They’re a critical piece of the puzzle, too, so don’t forget to set up metrics for those functions of your business that take into account their impact on the sales pipeline

Step Two: Select KPIs that make sense based on past performance

Now that you’ve thought through the various stages of the sales journey as it applies to your business, you’ll want to begin mapping it against real-world scenarios and whatever data you have at hand in order to begin selecting suitable KPIs.

That means talking to your sales and account management staff and coming to terms with what actually happens in the sales function of your business. Your ideas about how things work may not actually reflect reality, so it makes sense to take some time surveying the lay of the land.

The recommendation here is to start taking a ‘sales census’, beginning with the biggest figures and drilling down. To get you started, here are a few of the really big numbers you might consider looking at first:

• Total revenue — this is all the money your sales teams pull into the business over a given period, and can be useful as a very broad-brush yardstick measure, but will need to be drilled down into if you’re going to find any true insights into how to improve performance
• Market share — this is a great measure of your performance against competitors, but it may not always be easy to determine to a great degree of accuracy. Take these numbers with a grain of salt unless your industry has lots of publicly available sales revenue data or you have a sophisticated market research team on the case
• Annual growth — your sales growth might be measured by revenue, transaction value, customer value or even profits. Choose the correct measure for your needs and looking at annual change will give you an idea of whether you’re heading in the right direction. Narrowing the timeframe will yield more granular insights
• Average contract value (or average transaction value, average order value) — this number will give you a picture of the value each sale brings, and can be used as a benchmark by which you measure your teams or even individual sales staff against. Changes over time may indicate seasonal variability, or help you optimise when and where to deploy certain resources

The above is just a selection of some of the more general KPIs you might choose to start defining your sales process, but it’s by no means exhaustive. For a full list of sales metrics to start testing in your business, read this resource on ‘Essential sales metrics every business should track’.

Step Three: Test and learn

The final step to incorporating the right KPIs into your sales process is to begin testing out your hypotheses on which work best at each stage of the process.

This will involve a great deal of transparency in meeting with and sharing your thinking with sales leaders and their staff — after all, their willingness to commit to the organisation’s success is going to be the biggest factor when it comes to achieving it.

Set up leadership meetings before rounds of team-specific meetings, encouraging questions along each step of the way. The best thing you can do at this stage is set clear expectations around the idea that KPIs and benchmarking is a process of experimentation and refinement, so that every team member can have a say in determining what success looks like.

Likewise, you’ll want to set clear expectations around what success means for the organisation as a whole, and what rewards are on offer for individuals should that success be realised. On top of that, realistic timeframes need to be applied for each period of measurement with the expectation that goals will only be considered for alteration after a worthwhile amount of data has been collected.

With the right sales metrics in place, any business — regardless of how large or complex — can begin to identify problems at the root cause, rather than relying on assumptions. Coupled with accurate, real-time data insights, those problems can be identified, and rectified, faster than ever before.

Want to automate your sales pipeline management and track the sales metrics you need for future business growth? With MYOB Advanced cloud ERP, you can track the right sales metrics easily in one single platform.