Running any business effectively requires good decision-making grounded in good management information. Yet many companies still don’t take the time to understand which 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.
Consider the following example for a company with these KPIs:
Sales quota: $1 million
Average deal size: $125,000
Close rate: 35 percent
Leads needed in sales funnel: 8,000
Opportunities identified: 640 (8 percent)
Opportunities initially qualified: 128 (20 percent)
Opportunities bid: 26 (20 percent)
Opportunities won: 9 (35 percent)
Quota attainment based on above metrics: 112 percent
As you can see, changes in conversion rates can have a significant impact on several categories.
Average sale cycle time. Tracking your average sales cycle time is important for two reasons. First, it shows whether you have enough qualified prospects in your current pipeline to meet your quota based on business already sold and time remaining in your plan year. Second, it can indicate when qualified opportunities begin to age and become less qualified and less likely to close.
As a general rule, opportunities that age more than 150 percent of your average sales cycle time should be removed from a qualified status unless there are verifiable extenuating circumstances. If your sales cycle is six months, a deal that ages to nine months or more should be removed from the pipeline.
It’s often said that what gets measured gets done. KPIs must be meaningful, measurable and goal oriented. Take the time to start a basic sales KPI program and refine it as you become comfortable with the process.
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