It has always puzzled me when sellers and their managers view the idea of sales metrics as a negative, or at the very least as a complete waste of time. I look at sales performance statistics as a positive rather than a negative. In every professional sports activity, performance is gauged by the player’s stats. In fact, every player and their coaches, use those metrics to establish performance improvement goals. In sports, the stats are recorded by the player’s position on the team. Did you know that in football there are 77 different statistics in offense, defense and special teams? And, salaries for those players are inevitably linked to their performance results. I suggest the same should be true for full-time salespeople, and for Doer Sellers and Seller Doers. In fact, the purpose of this article is to recommend a cultural change in how sellers are coached and how they are compensated based on their performance statistics.
I will start with the roles that make up the sales team. And, yes I am suggesting that you look at the people who sell in your organization as a team.
The Full-time Salesperson: Spends 100% of their time selling. Keep in mind that travel time can be a burden, and in many organizations cause the seller to work fifty or more hours per week. A full-time salesperson can be a ‘hunter’ where he or she spends all of their time prospecting for business in new accounts. The full-time salesperson can also be a ‘farmer, focusing primarily on growing revenue in existing accounts; including new business development in new business units or geographic locations in existing accounts. Depending on how long the seller has been with the company, the seller may be required to carefully balance time on new business development in new accounts with time spent on growing revenue in existing accounts.
The Seller Doer: Spends the majority of their time selling. If a Seller Doer works 40 hours a week, at least 32 hours are focused on sales activities. The remaining hours are allocated to the performing their secondary job function. Seller Doers balance their time between new business development and managing existing accounts. It should be noted that highly successful Seller Doers are also called Rainmakers. This title is only bestowed upon highly successful Seller Doers and is not appropriate for full-time salespeople since selling is the primary job function.
The Doer Seller: Spends the majority of their time on their primary job function and a minimal amount of time on sales activities. Doer Sellers focus primarily on driving revenue from existing accounts. Since they are usually the ones either delivering the product or service or managing the delivery of the product or service, they have a distinct advantage from an account management perspective over Seller Doers.
I recommend you look at your current organization and assign roles to the players on your sales team. Now let us look at the statistics that measure performance for the players. Keep in mind that these stats are rolling averages based on historical performance, and that they may be different based on the player’s role on the team.
Meeting to Proposal Conversion Rate: How many sales meeting must I facilitate in order to generate a proposal or quote? If I take the number of sales meetings held (by telephone or face-to-face) divided by the number of proposals or quotes generated, I get a conversion rate as a percentage and can answer the question.
Proposal Decision Rate: How many proposals must you submit to get a sale? This metric is also called “Closing Rate”. I like the term “Decision Rate” better because it more accurately reflects what the seller is trying to accomplish, that is get as many yes decisions as humanly possible. If I had ten YES decisions and ten NO decisions, I got a total of twenty decisions from potential clients. If I divide the number of YES decisions into the total, I get a 50% Proposal Decision Rate and can answer the question.
Average Deal Size Sold: How many deals must I close to hit my annual quota? If I divide my average deal size sold in dollars into my total annual quota in dollars, I know how many deals I must close and can answer the question. Obviously the larger the deal size sold on average, the less deals I must close for the year.
Pipeline Win Rate: What is the required total dollar value of my sales pipeline so I can hit my annual quota? Pipeline Win Rate reflects a seller’s sales behavior and the quality of the business they chase. Pipeline Win Rates are also used for forecasting. If I lose a deal, my Pipeline Win Rate does not change. When I add dollars to the pipeline, my Win Rate prevent decreases. The only thing that raises my Pipeline Win Rate is closing a sale. Pipeline Win Rate starts very low at the beginning of the year, and gradually levels off with minor up and down fluctuations. If I add the total dollars that are in my pipeline categorized as Business Development, Pursuit/Chase, Proposals, Deals Won, and Deals Lost, and divide that number by the total dollars won, I can answer the question. If I want forecast potential sales dollars, I take the total dollars in my active pipeline (Business Development, Pursuit/Chase and open Proposals) and multiply that total by my Pipeline Win Rate percent.
I should point out that none of the above can easily be tracked without a Customer Relationship Management (CRM) system. Think about the impact these metrics could have on sales commission and or bonus dollars paid to members of the sales team. Should a player with a 60% Decision Rate make the same commission percent as a player with a 40% Decision Rate? Could there be a standard for Average Deal Size sold, that once exceeded, offers bonus dollars at the end of the year? Think about financial incentive as the motivation for performance improvement. Meeting or exceeding quota is not the only sales management objective. How a seller meets or exceeds quota has a greater impact on future performance.