In the last article we looked at ways to motivate your sale people from a “soft" perspective. Now that they are on board, trained and ready to go, it’s time to create your sales management infrastructure by setting measurable, “hard" objectives for your sales people, particularly with the first 90 days of their tenure in mind. This infrastructure will help you to pro-actively manage and measure the success of each individual in your sales team and prevent nasty surprises (missed revenue targets) in the future.
There is a tendency to focus only on revenue and making THE NUMBER, but this is a very narrow view of both sales and sales management. Michael T. Bosworth, author of “Customer Centric Selling" says that focusing on revenue “is an exercise in forensics." In other words, measuring revenue is measuring the past. What we need to measure are activities that cause revenue to happen, such as the number of calls.
The number of calls the sales person makes is admittedly one of the only things that can be measured in the very early days of his/her tenure, but measuring the number of calls alone is no guarantee your sales person will be effective. The number of calls is not always an indicator of sales success, since the quality of the call is equally, if not more important than the quantity. There is another factor to consider when measuring the number of calls and that is the number of calls it actually takes to get through to a prospect. These days it can take 6-10 calls just to get through to a decision maker. Measuring the number of calls must take this into account.
What else should sales managers measure? As Skip Miller, in his book Pro-Active Sales Management says, “measure the things that cause sales to happen." The number of cold calls is only one measurement. There are many more activities you can measure that are better indicators of sales success. These include, but aren’t limited to:
- Number of C-Level contacts made
- Number of quotes
- Number of presentations
- Number of conference calls
- Number of face-to-face meetings
- Number of qualified contacts made at networking events
Knowing which and how many of each of these activities will ensure success isn’t easy and there is no single right answer. It depends on many factors and should always be tied to your company’s overall business and sales objectives. This graphic offers a simplistic example of how overall business objectives drive sales objectives and how these drive sales activities.
If you are just starting out and don’t know where to start, you will have make an educated guess that will most certainly need to be refined and discussed with sales team over time. You have to start somewhere. Seek input from your team members and trusted colleagues.
There are many formulas for estimating activity levels. A very simple one is to start with the sales persona’s annual revenue target and work your way backwards. So, let’s say you want to increase revenue by $500,000, which also happens to be your sales person’s revenue target. You work back from that using the following information and assumptions:
- Increase revenue by $500,000
- Average project size = $15,000
- Number of projects needed = 33.3
- Number of quotes needed to win a project (assume a 1 in 4 close ratio) = 133
- Number of meetings, conference calls, presentations to get quoting opportunity (assume 1 in 3) = 399
- Number of phone calls to get meetings, conference calls, presenting opportunities = (assume 10) = 3999, or 86/week
Your assumptions will vary, depending on the kind of clients you seek, size projects you typically produce, your average sales cycle and estimated close ratios based on historical (even anecdotal information initially).
Measuring Quality of Activity
Quantity isn’t everything. All the activity in the world will be ineffective if the quality of the sales person’s activity isn’t up to scratch. Have a look at what your sales people are writing to customers, go on joint calls to get a first-hand view of your sales person’s presentation skills, review proposals that are being sent to your customers for the quality of message and writing, test your sales team’s knowledge (and presentation skills) by having them make educational presentations to their peers and others in your company. The market is too competitive to ignore these key skills. Developing these skills within your sales organization will help create a sales team that is a differentiator for your company in your customers’ eyes. Suggested qualitative skills to measure include:
- Prospecting skills
- Calling high skills (C-Level)
- Vertical market knowledge
- Presentation skills
- Proposal-writing skills
Tools for Measuring Sales Activities
There is no shortage of tools, namely CRM systems such as Salesforce.com, Zoho.com, Sugar and others, in the marketplace to help you measure your team’s activities. There will certainly be one that meets your measurement and budgetary requirements. All are web-based and offer customizable reporting capabilities. It will take an investment of time to investigate, select and then customize the tool that best suits your needs, but once set up, you can create a wide array of reports on individual and aggregated sales activities, sales opportunities, sales pipelines and revenue forecasts.
CRM systems can also help you monitor qualitative sales skills as well, since proposals and other sales-generated communications can be uploaded into customer records and reviewed by management at any time. The key is making its use by your sales team mandatory. You will need to schedule time to review your teams activities, but CRM systems can help you manage by exception (problems) rather than managing everything. You can focus on corrective action where needed and let your team get on with what is working well.
By measuring your sales people in a pro-active way, you significantly increase your chances for success. Measuring helps you establish benchmarks for performance and can help you identify performance problems such as skill deficiencies, activity deficiencies, inflated pipelines and unrealistic forecasts EARLY and enable you to take corrective action BEFORE the revenue target is missed. By then it’s usually too late and you and your sales person find yourselves scrambling to rectify the situation at best. At worst, forecasts may need to be revised, budgets readjusted and high-pressure management applied to the sales team to somehow make up the deficit. As they say, an ounce of prevention…