Measure Sales Performance with Key Leading Indicators

“An ounce of performance is worth pounds of promises.” – Mae West

In the end, it’s easy to measure a salesperson’s performance. They are either hitting their sales goals or they aren’t. However, when you’ve just hired a new salesperson, it’s tougher to measure, especially in a business which has a long sales cycle. In that case, the sales manager must learn to differentiate between pounds of promises and actual job performance.

What Causes Sales?
Kraig Kramers, author of CEO Tools says that the way to predict performance is to measure the activities or markers that lead to sales. The Key Leading Indicators (KLIs) will tell you in advance whether your salesperson is doing what needs to be done to perform to your level of expectations.

To know what those KLIs are for your business, analyze and understand all the steps that happen prior to the consummation of a sale. If there are 15 steps, then work backward to find out where it starts. For example, your sales cycle probably starts with one or more of the following lead-generating approaches:

  • An ad placed in the local newspaper
  • A pay-per-click process on Google
  • A telemarketing call to generate leads
  • A direct mail campaign
  • Network events

Identify what approach generates the most quality leads for the least investment and measure that religiously so you can continue to tweak those sources, monitor, and analyze the numbers.

The next step might include one or more of these KLIs:

  • Follow-up emails
  • Requests for Proposals
  • Requests for Quotes
  • Phone calls to schedule appointments
  • Inbound phone inquiries

A more qualified prospect leads to a person-to-person conversation which could take place on the phone, through email, text messaging, or face-to-face. Depending on the size and complexity of the product or service you sell, there may be a whole raft of steps including building relationships, building trust, asking questions, writing proposals, presentations to the board, negotiating, handling objections, and asking for action. These too can be measured to see how the salesperson is performing, and discover where the system is breaking down if it appears that sales are not coming in fast enough.

As an example, let’s say that your typical sales cycle (simplified) looks like this:

  1. $10,000 in ad spending per month in Google produces 1,000 leads.
  2. Your telemarketers call 1000 leads to get 100 qualified leads.
  3. One hundred qualified prospects are sent an email brochure and a personalized letter from your salesperson inviting an opportunity for a telephone appointment to discuss their needs.
  4. Fifty agree to an appointment.
  5. Forty keep the appointment and ten disappear for various reasons.
  6. Twenty agree to a second appointment.
  7. Fifteen ask for a proposal.
  8. Ten say yes and purchase your $50,000 software package.

Once you have similar statistics and an established process to follow, then you can measure performance. More important, you can pinpoint where performance breaks down and determine if the problem is lack of skills, lack of focus, lack of activity, or a lack of drive. If your salesperson isn’t selling, is it because she doesn’t have enough leads; because she doesn’t get to those leads in a timely manner; because she doesn’t write compelling emails; because she doesn’t ask the right questions; or because she never asks for the sale? Unless you have numbers to work with it’s difficult to identify the real problem and find a solution. In the meantime, when you ask, “How are sales?” she’ll respond with promises of “lots in the pipeline” and you won’t have a way of helping her to get better.

When you know your sales process and the KLIs, you can measure performance and correct potential problems with new salespeople before waiting five or six months to see if what they are doing is working.

Tracking KLIs will also tell you early on whether you need to do something to generate more leads. If you know that it takes 1,000 leads today to get 10 sales in six months, you know that sales are going to be down in September if you only got 500 leads in March. If it’s your job to generate the leads, don’t blame the salesperson.

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March 1, 2010

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