March 19th, 2012
Sales Leadership and Management in a Recovering Economy
I am speaking this week in Houston on the title of this blog, it is March 19th, 2012 and during the past few months the stock market has taken off and the papers shout out about the positive economic indicators that are being recorded: rents are heading up=housing will take off, (a leading indicator?) monthly job creation rates hit 200,000, etc…. What is your perception? More importantly what are you doing to lead and manage your organization and prepare of better times?
In today’s economic times, the companies most likely to thrive are those that invest time in scrutinizing their strategic sales-management plans. They review everything from their forecasts to their pipelines, looking hard at important numbers such as cost of sales, percentage of market share, salesperson-effectiveness ratios and customer lifetime value.
When we see companies struggling, it’s often because they lack such blueprints. Effective plans require combining an organization’s goals and individual salespeople’s business plans with a set of metrics designed to gauge everyone’s progress in meeting those objectives.
Following are what we believe are the fundamental metrics that partners should include in “dashboards” for measuring their sales teams’ effectiveness:
- Accuracy percentage for monthly forecast, by salesperson
- Dollar value of pipeline by stage; number of opportunities by stage
- Dollar value of pipeline ratio to future monthly quotas
- Actual sales activity compared to a defined set of standards
- Average order value
- A Win/loss rate percentages, by salesperson
Beyond the Basics
As you continue developing your company’s dashboard, you may wish to build in additional metrics such as the following:
- Value of net new account sales as percentage of total sales for month and year to date
- Existing account sales as percentage of total sales, month and year to date
- Rev salesperson profitability to sales volume
- Revenue per current customer per year as percentage of total sales
- Cost per lead, by source
- Sales-cycle time from initial contact by salesperson to decision
- Number of days with sales outstanding, goal vs. actual
- Blended billing consultant rate, goal vs. actual
- Realization consultant rate, goal vs. actual
- Utilization consultant rate, goal vs. actual
- Consultant backlog days, goal vs. actual
- Direct sales expense as a percentage of volume, margin and quota
Looking Ahead: Leading Indicators
In addition, smart sales leaders increasingly rely on what we call “leading indicators.” These are activities or ratios that can predict revenues at least 60 days out. While simply looking at future pipeline values can provide a similar forecast, growth-focused partners may find these indicators useful as well.
In most cases, sales events occurring early in the sales cycle are most likely to lead to high-percentage sales opportunities. If these begin to fall, future pipelines and revenues will probably follow the same pattern. Potential leading indicators include the numbers of:
- New-prospect calls made per week
- Face-to-face sales calls made per week
- Subject-matter expert or pre-sales tech-support calls made per week
- Discovery calls made per month
- Demonstrations and executive presentations made per month
We also recommend creating graphs comparing these numbers to dollars booked or margins generated, which can help salespeople see the relationship between indicators and results.
Finally, remember that the ultimate goal is improving your ratios and results each month and each quarter-not simply tracking them. That’s the real reason for developing a dashboard-and the real route to success.
About the Author
Ken Thoreson is the president of Acumen Management Group Ltd., a North American consulting organization focused on improving sales management functions within growing and transitional organizations. You can reach him at firstname.lastname@example.org. (Web): www.AcumenManagement.com or (blog) www.YourSalesManagementGuru.com His latest book: “Leading High Performance Sales Teams” is available on his web site.