If you’re a regular reader you might have noticed that I talk a lot about sales. So much so I sometimes think to the average person they think I write about too much about sales. I enjoyed my time working in sales while learning the ropes and enjoy doing it in my own ventures now. To those who are in business, they will hopefully understand why the emphasis on sales is necessary. It’s the business end, this is where all the magic happens. Learning how to sell is great but in the words of Peter Drucker “if you cannot measure it, you cannot improve it”. So here are the metrics you should be measuring in your sales.
A lead is simply a person or business (depending on your market) that you have engaged with interest in your product. Now many will add a dimension to this and talk about qualified leads versus unqualified leads. Qualified leads are those you have screened and assured are the right fit for your product and I prefer to focus on these. You may want to acquaint yourself with the sales pipeline or funnel if this is all Greek to you.
An opportunity is a qualified lead that has provided buy signals. Now what exactly constitutes a buy signal differs from business to business. As a rule of thumb, I would say once you’re discussing things like payment terms, installation, delivery and other details you have an opportunity. Not yet a sale but definitely worth noting.
There are a few stages that come between being an opportunity and closing which you can acquaint yourself with this article on the pipeline. For this article, we will combine all of these to a metric called pipeline. This makes sense because customers tend to bounce around within the pipeline before finally making the order. So at all times, you need to be aware of how many customers are in your pipeline.
Duration is simply how long it takes to close a deal from start to finish. This I have practical experience with. I worked in an organisation that was business to business (B2B) which sold bespoke products. What management had never measured was the average time to close deals. After a while and using my sales experience I observed that deals took 3 months on average to close. – The time is taken to close a deal from initial engagement to a signed order. This helped change the approach towards the sales staff and the general sales management in the organisation.
This seems a bit weird to track. After all, you know exactly how much your products sell for. However, there’s a deeper layer to this. What is the average invoice size? How much do customers buy from you in one go? Over time, is this improving or diminishing? That is extremely telling information. This is one of the most important metrics to keep track of.
The conversion ratio is the rate at which you turn qualified leads into sales. This is telling of how effective your sales efforts are. For example, if you start with 100 qualified leads and up with one sale out of that your conversion rate is 1%. There is no such thing as a good or bad conversion rate, this differs from industry to industry. What matters is knowing yours. Tracking over time is useful. However, if you want to take it up a notch, you can further dissect the conversion rate into conversion rates along the pipeline to learn valuable information.
How many of your leads become qualified leads? This is a lead conversion ratio that can tell you if you are talking to the right people in the first place. How many qualified leads become opportunities? That’s your opportunity conversion rate and can tell you if you are saying the right things to leads. How many opportunities become quotes? Quote, conversion rate tells you how well you are getting them to discuss business. How many quotes become sales? Perhaps there is a problem in your process, pricing or closing?
Keeping track of these metrics over time will give you a good idea of the most important things about your sales. Not only how well you are doing but also the source of the success. Same if you are struggling, it can indicate bottlenecks for you.