Running any business effectively requires good decision-making grounded in good management information. Yet many companies still don’t take the time to understand what sales key performance indicators (KPIs) they should track and how often. Understanding your leading and lagging indicators will help you determine actions needed to achieve your selling goals
Quantity of leads. Ask people on your sales team for the definition of a lead and you will likely get a different answer from each of them. Simply stated, a lead is an individual who can buy (or influence the decision to buy) your product or service. Once you determine the percentage of leads that can be converted into qualified prospects—and your closing rate on those leads—you can determine the actual quantity of leads you need to be working above your sales funnel.
Conversion rate of leads to qualified prospects. Understanding the progression of a lead to a qualified prospect is an important factor in understanding the overall size of your lead database. A low conversion rate means that you will need a large prospect universe. In some businesses, the lead conversion rates can be improved by a more focused prospect segmentation, but in others the conversion rate will remain flat.
Close rate of qualified leads. This calculation is usually measured as total wins divided by opportunities bid (also called a “bid/win rate”). This should be the easiest metric to track but may be deceiving based on the way you categorize “no-decision” opportunities. It’s best to remove no-decision opportunities from the calculation, as many of these opportunities may have been poorly qualified by inside or outside sales. (If you do leave them in, remain consistent and always count them).
Often the quickest way to raise win rates is to not bid poorly qualified or unqualified opportunities. This can be hard to enforce but can be improved with a robust qualification process. After removing no-decisions, it’s a sound practice to calculate closing rates on RFPs against the closing rates on non-RFP opportunities—and the numbers may be surprising.