Just to recap, a typical KPI in most organisations is the sales budget, which specifies what revenue the business requires per annum or what each sales representative is expected to bring home, during a given period. Let me share more on how to create effective sales KPIs in your business, so sales teams and sales managers meet the company’s sales or revenue goals.
And yes, of course, this is a very central and important goal to focus on, but what happens if that goal is not met?
The non-achievement of effective sales KPIs
Questions such as the following arise concerning sales KPIs:
- What is the reason for the lack of results?
- What is the type of action that is needed?
This can be very hard to determine if the sales KPIs are not designed the correct way from the beginning. Ask this again. How to create effective sales KPIs?
How to define effective sales KPIs
Identifying effective sales key performance indicators (effective sales KPIs) needs some serious thinking.
The real question is what’s right for you…
Which sales metrics will help you achieve your company goals?
Effective sales KPIs are never one-size-fits-all.
So instead of trying to persuade you that certain sales KPIs are the best, I want to empower you to define the right metrics for your sales team. Then we will look at a list of the most common sales KPIs.
How to create effective sales KPIs
1 – Start Big
What are your business KPIs for:
- Company goals?
- Revenue?
- Growth?
- Customer acquisition?
- Customer Retention?
- Production goals?
Typically, companies have one primary goal with one or two secondary goals that provide context and support to the primary goal.
Ideally, everyone in the company should know this off the top of their heads…
Otherwise, what are they doing there?!
For example, the company goals might look like this:
- Primary goal: Increase annual revenue to X amount
- Secondary/supporting goal: Grow 6% month over month
2 – Set specific objectives
Questions you should be working on answering
- What is your annual sales KPI that will help your company reach its overall business goals? Then take this broad annual sales KPI and break it down into monthly sales KPIs.
- In terms of value, what is your average sale size?
- What is your average sales cycle length, in other words, the amount of time from your first touchpoint with a prospect to closing the sale, averaged across all sales?
- Do you know what is your cost of sales?
- Do you know what is your customer’s lifetime value?
It is important to view your primary KPI (e.g. total annual and monthly sales KPIs) in the context of your industry and specific business.
Specific effective sales KPIs
- Primary sales KPI: $ Monthly Sales
- Secondary sales KPIs: % growth month over month
Contextual metrics
- Average deal size ($)
- Average sales cycle X days/weeks/months
- Cost of sales ($)
- Opportunity sales rate (%)
3 – Focus on action
Take the sales KPIs and contextual metrics that you outlined in Step 2 and determine what your team needs to do to reach those effective sales KPIs.
After doing the above, then work backwards and answer the following questions that relate to the sales KPIs:
- How many sales do you need to hit your target?
- Based on that number, how many potentials or opportunities should be in your sales pipeline?
- How many calls/emails/meetings will be necessary?
- How many leads or contacts will your marketing team need to generate?
- Keep drilling down until you have a solid understanding of the key activities driving your revenue
Sales KPIs are most effective when they target specific actions for the following two reasons:
I recommend compiling a shortlist of 5-8 effective sales KPIs that include both contextual metrics and activity-based metrics.
Focus
This helps you to focus on the most critical data without distorting their impact (this can easily happen if you only focus on 1-2 metrics). You can always adapt, add, or remove this list later.
- Contextual example: Monthly Sales $ to date vs. target monthly sales $
- Activity example: X follow-ups vs. (#) sales qualified leads
5 – Monitor your metrics
This one is really a no-brainer, but it is far too important to skip. Having the key metrics in front of your team on a daily basis will help them track progress and prioritize actions.
Defining effective sales KPIs will be a waste of time and energy if you archive them in a static document or spreadsheet.
Sales KPIs are fluctuating metrics meant to be shared and monitored regularly.
A great way to do this is by getting your sales KPIs on a dashboard in your sales department’s office and then managing them on a daily basis.
The question is how can you determine sales conversion rates for the sales team? This blog will give you more insight into how to do just that.
Tracking your sales KPIs
Now that you are equipped to define effective sales KPIs for your team, we will now look at the most common sales metrics that are tracked.
Most common sales KPIs, for sales executives and managers
- Monthly sales target ($) (with goal & percentage for context)
- Cost of sales to revenue ratio
- Marketing qualified lead (MQL) to sales qualified lead (SQL) Conversion rate
- Sales qualified leads (SQL) to sales conversion rate
- Sales growth vs. goal
- Activity per rep vs. sales per rep
- Sales closed (#) vs. goal
- Average sales cycle
- Average follow-up attempts
- Product performance (list of top-performing products/services)
Common sales KPIs
Most common sales KPIs for account managers, business development associates, and sales representatives:
- Individual monthly sales target ($) (with goal & percentage for context)
- Opportunity funnel
- Lead response time
- Individual sale/loss ratio
- Individual sales activity (# calls/emails/meetings) vs. efficiency
- (#) Qualified opportunities (with goal & percentage for context)
- Value of closed sales this month ($) vs. target
Individual effective sales KPIs
- Individual monthly sales target ($) (with goal & percentage for context)
- Marketing qualified lead (MQL) to sales qualified lead (SQL) Conversion rate
- Sales Qualified Lead (SQL) to Sale Conversion Rate
- Sales closed (#) vs. weekly and monthly goal
- Average sales cycle
- Average follow-up attempts
- Individual Sales/loss ratio
A final word on effective sales KPIs
Effective sales KPIs are a great way to measure and improve, but they are only helpful if they are paid attention to.
- Get to know your sales KPIs and review your data weekly.
- Pay attention to trends so that you can react appropriately.
It is also helpful to include the sales team in the process, as well as review with each team member once a week so that you can spot any lags in performance early on and be able to correct them quickly on how to create effective sales KPIs.
Before you know it, you will find that you can actually change the future course of your business and sales based on achieving your sales KPIs.
Suggestions to create effective sales KPIs
I suggest that you use a spreadsheet to develop your annual sales goals and break them down into monthly, and weekly sales KPIs, so as to allow you to appoint each sales rep’s individual weekly and monthly sales KPIs.
Conclusion
What makes a KPI indicator effective in increasing sales revenue this year? How to Create Effective Sales KPIs. This will increase sales revenue, have you got answers to these questions now?
Part of your performance management framework is to ask yourself, “What makes your decision on key performance indicators (KPI) effective?” This will increase sales revenue. You should also agree to have weekly and monthly meetings as a group to discuss progress and challenges.
Your challenge
Create effective sales KPIs (Key Performance Indicators) for your business to measure and track its performance. Follow these steps to create KPIs that align with your business goals and objectives:
- Identify your business objectives: Identify the goals you want to achieve with your business, such as increasing revenue, expanding your customer base, or improving customer satisfaction.
- Determine your sales metrics: Identify the metrics that are relevant to your business objectives, such as sales revenue, customer acquisition, lead conversion rate, or customer lifetime value.
- Set measurable targets: Set realistic targets for each metric, based on your historical data, industry benchmarks, and your business objectives.
- Assign responsibility: Assign responsibility for achieving each target to a specific team member or department, to ensure accountability and ownership.
- Track progress: Regularly track and analyze your sales data to evaluate your performance against your KPIs. Use data visualization tools to quickly understand trends and identify areas for improvement.
- Review and adjust: Regularly review your KPIs and adjust them as necessary, to ensure they remain relevant and aligned with your business objectives.
By implementing effective sales KPIs, you can continuously measure and improve your business performance, leading to increased growth and success.
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