You must learn to master the skill of choosing and managing the right metrics. That is what the top sales leaders do today.
There are three kinds of sales metrics that need to matter to you: leading indicators, lagging indicators, and unique indicators. Here's how each of these works.
This describes everything that leads up to you making the sale. It’s the top of your sales pipeline and defines how capable you are at opening an opportunity — not closing a sale.
Your organization should have several metrics in this category, and the most important one is called overall gap to growth. This is simply the distance between where you are now and where you need to be to hit your next sales goal. When you define this, you define your work for the rest of that sales period (for example, the next week or the next month), ensuring that you’re doing what’s needed to hit your target. Shrinking that gap is how you measure your success in achieving your leading indicators.
Leading indicators include all the activities and sales stages that happen before a proposal is sent out. With that in mind, other metrics in this area must include:
- The number of qualified opportunities created in each period compared to what’s required to hit your target
- The length of time it takes to convert a lead to an opportunity, grouped by marketing source (for example, referral, cold call, inbound)
- The number of attempts (calls, meetings, emails) it takes to convert a lead into an opportunity, grouped by marketing source (for example, referral, cold call, inbound)
- How quickly an opportunity moves through the top half of the pipeline when you win the opportunity compared to if you lose it
- The conversion ratios between all stages leading up to the proposal stage
Lagging indicators are metrics focused on getting an opportunity signed. It’s also where sales managers often mess up their analysis. They forget that the actual sale is not a leading but a lagging indicator. Making a sale only tells you what you did right in the past to get you to where you’re at now.
Remember: In sales metrics, opening skills and closing skills are two very different activities. Each measures a different set of requirements. Your data must reflect this fact.
To measure how effective you are at closing, you must look at:
- Your closing rate (conversations to sale). You must define yours. A healthy average is 35%. If yours is lower, you likely have a qualification problem or a proposal quality problem. If it’s higher, you have an input problem (that is, your sales reps are only putting completed deals in your pipeline) or your prices are too low. Once, a VP of sales told me his team didn’t have a closing problem. But when I asked for closing ratios, he told me they didn’t measure it. Working together, we found it was less than 10%. They were leaving a lot of money on the table with their poor selling skills and didn’t know it.
- The average number of days an opportunity takes to close. You should be measuring both wins and losses, determining whether it’s taking you longer to win or lose a deal once a proposal is sent.
- Churn rate. Measure how many customers leave you every year.
- Cross-sell rate. Look at how much more each customer buys from you every year.
Last but not least, this describes management metrics that are not opportunity related but specific to your operation. For example, as a sales manager, you look at what percentage of your team hits their target every quarter. What percentage regularly misses or exceeds it? These unique indicators are designed to diagnose challenges that are specific to your business. They give you insights you can use to help thoroughly solve those unique problems.
Think of sales data and sales metrics the same way that an athlete looks at nutrition. Be selective with what you’re consuming. Be meticulous in measuring meaningful outputs. What you’ll gain is valuable insight for your sales organization to help you learn, plan, and execute so that you grow better, faster, and stronger.
“You need data that explains what’s currently happening in your market and what will be happening in the future, as opposed to just what was happening last quarter or in the last month.”