How Do You Measure Sales Success?
Some easy dashboard metrics for partners who want to squeeze as much as they can from their strategic sales-management plans.
- By Ken Thoreson
- September 01, 2008
In today's tough 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 Microsoft partner 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:
- aAccuracy percentage for monthly
forecast, by salesperson
- aDollar value of pipeline by stage;
number of opportunities by stage
- aDollar value of pipeline ratio to future monthly quotas
- aActual sales activity compared to a defined set of standards
- aAverage order value
- aWin/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:
- aValue of net new account sales as percentage of total sales for month and year to date
- aExisting account sales as percentage of total sales, month and year to date
- aRev salesperson profitability to sales volume
- aRevenue per current customer per year as percentage of total sales
- aCost per lead, by source
- aSales-cycle time from initial contact by salesperson to decision
- aNumber of days with sales outstanding, goal vs. actual
- aBlended billing consultant rate, goal vs. actual
- aRealization consultant rate, goal vs. actual
- aUtilization consultant rate, goal vs. actual
- aConsultant backlog days, goal vs. actual
- aDirect sales expense as a percentage of volume, margin and quota
Looking Ahead: Leading Indicators
In addition, smart Microsoft partners 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:
- aNew-prospect calls made per week
- aFace-to-face sales calls made per week
- aSubject-matter expert or pre-sales tech-support calls made per week
- aDiscovery calls made per month
- aDemonstrations 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.
Ken Thoreson is managing director of the 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 email@example.com.