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What's Your Magic Number? |
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Submitted by Benton Bernhardt
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The most successful businesses — and certainly, sales departments — have identified their Key Performance Indicators (KPI); individual gateways that directly effect the outcome of a particular process. Then they measure the competency ratios in line with them.
Have you identified the KPIs in your sales process?
A good KPI example in the sales process might be how many times you advance the first sales appointment to the next phase, whether that’s a demonstration, a site visit, a survey or a proposal. Another KPI is how many times you gain a new customer once the first gateway is passed. And when you do gain a new customer, what’s the average revenue you achieve? That’s certainly an important KPI. Because if your average revenue per sale is 40% less than the average peer KPI, you might want to find out why and take focused action to improve it, as you’re leaving money on the table.
And what about the length of a sales cycle in days? Is that conditional or do you have a degree of control over it? If you have a team member that has an average sales cycle 30% shorter than the peer group, uncover and assimilate those best practices out to the rest of the sales team. Less time, more results. That makes ‘Sales Cycle’ a valuable KPI.
On a practical level, KPIs can provide management prospect reactions to their service offering for feedback to marketing and product development, detect problem areas in sales performance and signal the need for strategic or tactical modifications — even an all-out intervention through pinpoint sales performance training.
Perhaps the most overlooked KPI is the individual ‘Magic number’; how many new weekly sales opportunities must be generated based on neighboring KPI’s. Think of the magic number as the fuel in your gas tank needed to get from point A to point B. It’s directly proportional to how far a distance, how fast you drive and your average miles per gallon. Your sales process ‘Magic number’ is a derivative of your average revenue per sale, 1st appointment to proposal ratio, closing ratio and revenue goal. It’s your ‘Activity barometer’ and it should be at 100%.
The following are some tips for improving several sales process KPI’s.
If your current 1st Appointment to Proposal ratio is below 65%:
1. Internally define what your ‘Next step’ objective of the 1st appointment is; a demo, a site visit, a survey or a proposal. Then train to a process and measure the outcome.
2. Decide to start at the ‘Top’ with the fiscal authority that can ‘Call the shots’.
3. Avoid ‘Selling’ your product on the 1st appointment. Instead, outline your diagnostic steps to evaluate the fit between your solutions parallel to their business objectives.
If your current Closing ratio is below 65%:
1. Ask pertinent questions to what the Prospect Company’s decision-making process is, what the internal criteria for change is and what players need to be involved for evaluation.
2. Communicate a timeline and set a specific date for the 2nd appointment before leaving the 1st appointment. Encourage that all management players be present at the next appointment.
3. Catalog risk factors for each management player and develop strategies, tactics, and tools for direct communication to them.
4. Have relevant industry and title reference letters available for ‘Real-time’ credibility.
If your current ‘Activity barometer’ is below 100%:
1. Announce the Competency of converting conversations to appointments as a Key performance Indicator for sales success.
2. Define an appointment setting training objective and set a realistic goal.
3. Develop a training process in line with prospecting scenarios and best practice communications.
4. Don’t sell your ‘Widget’; sell the Business reason to meet.
5. Partner with technology to transfer best prospecting practices into ‘Intellectual capital’ promotion throughout your sales society.
Ultimately, sales trainers and management should work in concert to create a new culture by replacing random sales routines with specific KPI competency training.
Targeted and timely KPI training can make a critical difference to your monthly revenue scorecard. In today’s high sales performance culture migrate away from monthly and quarterly ‘Quota’ focus to daily routines and weekly goals. The opportunity rests squarely on switching paradigms from the required ‘End result’ to the necessary steps (KPIs) to get there routinely. Then build supporting tools for learning and application.
And don’t forget your ‘Magic Number’.
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