Measurable equals Manageable
by JT Halbisch
When evaluating a sales team’s performance, managers often focus solely on the number of sales made. This is a crucial aspect — but the sale is merely a lagging indicator. If you don’t have any sales closing today, it means your team has been underperforming for months.
So, how do you build leading indicators as a sales leader, monitoring the behaviours expected today for sales tomorrow? Key Performance Indicators (KPIs) is the solution. KPIs are critical leading indicators that ensure a stable pipeline and potential revenue. They have a method of objective calculation that allows you to see into the future.
The distinction between a sales pipeline and a sales forecast is the first step in deciding which KPIs to calculate and measure correctly. A sales pipeline depicts where customers are in the sales process. Sales pipelines indicate how many deals salespeople are supposed to close in a given period, as well as how close they are to meeting their quota. (Kulbyte, 2021) Whereas sales forecasting is the method of projecting future revenue by calculating how much goods or services a sales unit may sell in a given period. (Anaplan, 2018)
According to Colleen Francis, President and Founder of Engage Selling Solutions, a well-defined pipeline and its phases aid in the organisation of your sales process and the creation of valuable tools and benchmarks for your sales team, making it much easier to forecast your sales force’s potential performance. She also mentions that a sales forecast is a tool for budgeting and spending in the future. Calculating key performance indicators (KPIs) related to lead conversion progress, such as cost per lead, will help you budget accordingly and accurately predict your revenues.
Important KPI’s to consider:
— Leading indicators (KPI’s for funnel development)
— Lagging indicators (Revenue and Quota focussed KPI’s)
— KPI’s for account management and client retention/growth
What is the importance of KPIs in sales of small-to-medium organisations?
— They are actionable
— You can measure them accurately
— They are timely
— They impact the bottom line
“If you can’t measure it, you can’t improve it.” — Peter Drucker
Having a measurable metric like KPIs and the appropriate expertise to analyse the data, managers’ responsibilities would be comprehensively enhanced to provide an actionable way to achieve overall business strategies and goals.
References:
Anaplan (2018) Beginner’s guide to sales forecasting methodology. https://www.anaplan.com/blog/sales-forecasting-guide/#:~:text=What%20is%20sales%20forecasting%3F,month%2C%20quarter%2C%20or%20year.
Francis, C. (2013) The Importance of Key Performance Indicators in Measuring Sales Success. ENGAGE.
https://www.engageselling.com/blog/article-importance-of-key-performance-indicators/
Kulbyte, T. (2021) 10 WAYS TO MANAGE YOUR SALES PIPELINE. SuperOffice.
https://www.superoffice.com/blog/sales-pipeline-management-tips/
Maguire, A. (2019) 7 KPI meanings small business owners need to know. Quickbooks
https://quickbooks.intuit.com/r/financial-management/the-7-most-important-kpis-to-track-as-a-small-business/#:~:text=Key%20Performance%20Indicators%20(KPIs)%20are,business%20process%20in%20real%2Dtime.
