Even the best intentions behind a performance improvement initiative will fall flat without measurement. However, data are dispersed. Moreover, as competition continues to escalate, many businesses are hard-pressed to find the time to organize and analyze data. Therefore, the most effective businesses are thinking about using the data they do have differently. They’re measuring what matters.
What matters to most selling organizations is the health of the business. Given that this performance is largely driven by the effectiveness of sales training, many of the critical metrics examine the ability to generate and convert demand in the marketplace.
The following eight sales metrics that do exactly that. These metrics work because they are universal and cover operational and financial aspects that apply to both the organization and the individual. Here, we look at each one and why it matters.
1. Win Rate
For many businesses, win rate is more important than any other metric. Commonly, if the win rate is strong, most other metrics will show similarly strong numbers. This figure illustrates both market competitiveness and the number of new pursuits that close with a “win” status. Some choose to break out this measurement and compare how the win rate differs among teams. Win rate answers the “how” of performance, but to understand “why,” leaders must go deeper and explore more granular metrics.
2. Quota Attainment
If the win rate is faltering, leaders may turn to quota attainment to find answers. This metric shows how well the sellers are performing toward a sales goal. A low quota attainment might suggest that selling initiatives are not being properly adopted or are failing. The number is qualitative rather than quantitative and signals the effectiveness of business strategies.
3. Time to Productivity
A new employee has only so much time before the honeymoon ends and the marriage begins. Time to productivity illustrates how well the seller is making this transition. Leaders considering a new hire might look at this metric to gauge costs that go beyond salary. For example, global companies like SAP examine time to productivity and even ongoing productivity. Time to productivity shortens as sales leaders place more emphasis on fostering a new hire’s development.
4. Sales Cycle
The sales cycles and the marketplace change in tandem. While a sales team may be effective at reaching a shorter sales cycle, shifting buyer preferences necessitate new strategies. This dynamic increases the sales cycle. This scenario can play out internally as well; the cycle will change depending on if the priority lies with selling to new or existing customers. New customer acquisition requires much more time than selling to an existing customer. The sales cycle also decreases when operational changes make it easier for a customer to work with a seller. As research from Sirius Decisions explains, “Shorter sales cycles demonstrate process fluency.”
CBS reports that for “more than 40 percent of U.S. jobs, the average cost of replacing an employee amounts to fully 20 percent of the person’s annual salary.” For this reason, attrition is a valuable measurement. Attrition is often considered an inward-looking metric and thought to change based on management styles. However, the number can also change based on the level of demand for the seller’s product. The number is also a lagging indicator of other measures, such as ramp time, productivity and engagement.
6. Contract Value
Sellers must work harder today as technology erodes competitive advantages. In seeking larger contract values, sellers can justify spending more time to go deeper into solutions for a client. Therefore, contract value measures how well sellers are targeting and closing the sales they source. Additionally, it is a good metric for companies seeking to sell multi-division solutions.
Profitability is supported by the ability to articulate a competitive advantage and by focusing on a product mix that optimizes margins. Leaders should consider profitability when planning how to spend and allocate resources to win a sale. Greater efficiency around pursuit strategies will also help the profitability picture.
Commonly, pricing is a function of negotiation skills that seek to maintain the value of the deal through to the signed contract. Justifying prices requires a sales team to elevate themselves to the role of a trusted advisor. The more a seller can connect product solutions to the nuanced needs of the client, the more pricing latitude will be available.
These metrics serve not only to answer key questions regarding the health of a business, but they also lend valuable insight into where leaders should explore further. The earlier a business begins measuring, the more complete and useful the picture will be for leaders effecting change.