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Just to recap, A typical KPI in most organizations is the sales budget, which specifies what revenue each sales representative is expected to bring home, during a given period. Let me share more on How to Create Effective Sales KPI’s in your business, so sales teams and sales managers meet the company’s 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?

How to Create Effective Sales KPI’s

Questions such as the following arise:

  • 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 KPI’s are not designed the correct way from the beginning. Ask this again, How to Create Effective Sales KPI’s ?

 

How to Define the Right Sales KPI’s

To identify sales key performance indicators (KPI’s), it needs some serious thinking.

The real question is what’s right for you…

Which sales metrics will help you achieve your company goals?

KPI’s are never a one-size-fits-all.

So instead of trying to persuade you that certain KPI’s 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 KPI’s.

How to Create Effective Sales KPI’s

1 – Start Big

What are/is your:

  • Company goals?
  • Revenue?
  • Growth?
  • Customer acquisition?
  • Customer Retention?

 

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 goal that will help your company reach its overall business goals? Then take this broad annual sales goal and break it down into monthly sales goals.
  • 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?

 

It is important to view your primary goal (e.g. total annual and monthly sales) in the context of your industry and specific business.

Specific sales goals

  • Primary sales goal: $ monthly Sales
  • Secondary sales goal(s): % 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 goals and contextual metrics that you outlined in step 2 and determine what your team needs to do to reach those goals.

After doing the above, then work backward and answer the following questions:

  • 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

 

KPI’s are most effective when they target specific actions for the following two reasons:

  • One, action-oriented KPI’s inspire action
  • And two, KPI’s that are focused on action help uncover possible causes when the overall goal is not met

 

Pipeline flow:

  • Sales revenue against budget planned
  • The number of leads
  • How many qualified leads
  • Number of qualified prospects
  • What is the number of potentials or opportunities
  • The number of sales

 

Actions required:

  • Send X outreach emails
  • Send X follow-ups
  • Make X calls
  • Conduct X meetings
  • Send X proposals
  • Online ads

 

4 – Prioritize Your Metrics

After completing the exercises in step 3, the most critical metrics should become obvious.

I recommend compiling a shortlist of 5-8 sales KPI’s 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 your KPI’s will be a waste of time and energy if you archive them in a static document or spreadsheet.

KPI’s are fluctuating metrics meant to be shared and monitored regularly.

A great way to do this is by getting your KPI’s on a dashboard in your sales department’s office, and then to manage it on a daily basis.

 

Tracking Your Sales KPI’s

Now that you are equipped to define the right sales KPI’s for your team, we will now look at the most common sales metrics that are tracked.

Most common sales KPI’s, 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)

 

Most common sales KPI’s 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

 

Most common sales KPI’s

 

  • 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

 

At Last

KPI’s are a great way to measure and improve, but they are only helpful if they are paid attention to.

Get to know your sales KPI’s 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 KPI’s.

Before you know it, you will find that you can actually change the future course of your business and sales.

 

Suggestion

How to Create Effective Sales KPI’s

I suggest that you use a spreadsheet to develop your annual sales goals, break it down into monthly KPI’s, to appoint each sales rep’s individual weekly and monthly KPI’s.

The quicker you do this the quicker you will feel in charge of the revenue generation part of your business.

 

In Closure

What makes a KPI’s indicator effective to increase sales revenue this year. How to Create Effective Sales KPI’s. 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.

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