Take a glance outside your office door right now, and look at what your sales staff is doing. They are on the phone, taking notes, entering information into the computer--they’re working hard, being productive, and closing the deal. Looks good, right?
Now, look at your monthly sales statistics--do they match up with what you just saw? Are your sales reps hitting their targets? How productive are the leads your marketers are passing on to them? And how can any of this be quantified to make it more efficient? Above all, what is your most important metric?
One thing should be made clear right away: There is no one “most important metric” that can act as the key to solving all your sales problems. Each business, depending on its size, market, region, and demographic need, might concentrate on a different measurement for determining success. Even within a single business, different departments might have different focal points: Marketing might be concerned with the speed-to-contact rate of leads returning sales calls, for instance (a good measurement of how strong the initial lead was), while sales might measure the conversion rate to an actual sale (a good measurement of how well the sales staff is conducting the conversation).
Even if there’s no magic bullet to cure your business ills, we still believe that thinking about the usefulness of the metrics you are (or aren’t) using to measure success is an important part of the process. In rapidly changing, competitive markets, it’s not enough to rely on what your eyes see, or the same, “common sense” stats your industry has used in the past (if those always worked, you probably wouldn’t be reading this post for new ideas!). Here are 3 metrics we feel are important for gauging how well your sales staff is using its time:
1. Number of Calls v. Number of Live Conversations
As we’ve discussed in previous blog posts, it’s definitely good to have your sales reps making many calls a day, but more important is the number and quality of the conversations they’re having. We might think of it as a set of equations:
10 live conversations > 10 phone calls
10 20-minute conversations >10 30-second conversations
We think that, in this case, volume of time is a secondary factor to context and quality. In an age of automated calling and omnipresent voicemail, how many live conversations are your reps having? What’s the length (the total “talk time”) of those calls? While raw “talk time” data must be contextualized by type of call, conversion rate of lead to sale, etc., your reps need to make sure they’re taking the time to establish real relationships with potential customers in these calls (Spencer Wiedeman suggests that it takes 33.4 calls to close one sale, so those relationships must be established quickly if you want your lead velocity to match projections). That leads us to...
2. Lead Velocity
“Velocity” is an important concept for tracking the efficiency of your sales and marketing teams (and how well they work together). It refers to the distance/stages a “prospect” must cover in order to become a regular customer, and the time it takes for that journey to be completed. The rate of change between several stages of the funneling process (from the time it takes for a prospect to turn into a lead, to the time it takes that lead to turn to an opportunity, to that opportunity turning to a sale) is then the velocity. You want to speed it up as much as you can, allowing the time cycle for each potential sale to decrease, in order to have a better chance of closing each deal and getting estimates on monthly recurring revenue (MRR).
Tracking those velocities can let you know how well lead generators are doing in finding genuine opportunities, as well as how well your sales team is doing converting those opportunities to real revenue. That information, in turn, can help you to tweak the various parts of your team, in order to decrease the time between each stage of the cycle.
We believe that tracking your Lead Velocity Rate can give you a good estimate of potential month-to-month sales. Some experts suggest that growing your company’s LVR at “about 10-20% greater than your desired MRR growth” gives you a good chance of hitting desired sales quotas even if older deals are still working their way through the pipeline.
3. Openers v. Closers (or Qualifying v. Closing the Deal)
Live conversation numbers and accelerating leads are great, but as business relationships are established and developed, it might come down to one simple question: who are your openers and closers?
We believe it’s essential to track how well your reps are qualifying leads and closing deals. Gleanster Research stated that 50% of leads are qualified but not yet ready to buy, so having reps who can begin the conversation, and then convert to a sale, is crucial. A recent study suggests that reps need to generate 32 opportunities for every 1000 calls; others suggest a 50% rate on qualifying leads, and a 25%-30% rate on closing deals. You should scale to whatever your company’s needs are, but keeping track of these rates will allow you to understand how well openers and closers are performing, who might need to be reassigned to one or the other position, and what kinds of further coaching your reps might need.
Choosing, tracking and tweaking these metrics can help you gain a better sense of what is and isn’t working in your lead generation and sales processes, and allow you to create a stronger funnel of opportunities and sales. How are you using these metrics in your own business? What are the metrics that matter for your company? Please share your stories in the comments below.