Key Sales Metrics for a Business of Any Size
Analysis of sales metrics is a structured process at any successful large business. Key metrics are reviewed, analyzed, and over-analyzed on a monthy, quarterly, and annual basis. A small business with grand aspirations should be no different. Frank J. Rumbauskas Jr., author of Never Cold Call Again: Achieve Sales Greatness Without Cold Calling, provides four valuable sales metrics to start with:
Conversion rate: Also known as a “close rate,” your conversion rate indicates the quality of your leads. A low conversion rate is a sign that your leads may not be qualified--or your sales force is doing a poor job ruling out those potential clients who have no intent or ability to buy.
Profit margin per sale: Buyers who don’t have a strong need or desire for your product will negotiate hard and insist on a cut-rate price. However, qualified prospects who have an immediate need are less interested in price and more concerned with your ability to provide what they need. If your leads aren’t qualified at the start--or qualified by your reps--your profit margins will suffer. A low profit margin per sale indicates that you need to raise the bar on your lead-generation efforts.
Length of sales cycle: Every industry and every product has an average sales cycle. Is yours above average? Below average? If your sales cycle is below average, you’re doing something right. Recognize the positives that are shortening your sales cycle, such as top-notch sales talent, and stay on that course. If your sales cycle is longer than average, there could be any number of problems, including unqualified leads or sales reps in need of additional training.
Consistent performance among sales reps: If your company makes solid hiring decisions, provides quality leads and trains salespeople well, performance should be fairly consistent among all sales reps. It’s natural for some reps to be stronger than others, but if you have a “big gun” who produces tremendous numbers every month while another rep cannot make quota, something is wrong.
Continuing to measure and review these metrics consistently will give small business owners a baseline for measuring people, effectiveness of sales strategy and processes, and quality of leads. Possible outcomes of these metrics could include refinements to marketing and sales strategy, changes to training plans, and even providing different qualities to look for when hiring.
How Healthy Are Your Sales? (Entrepreneur Magazine)