Revenue Goal: Is That All You Got?

By Karl Berger, Founder, Fractal Sales Solutions LLC

 

Working with small companies, I spend a lot of time aligning sales objectives, goals, compensation plans and messaging with the company’s objectives. This may sound obvious, but each client has its own history, focus, people and process – and sometimes the above gets lost in actual practice. My clients have found that by bringing in a fresh perspective, when combined with their expertise, enables dramatic growth and creates a long-term, perpetual growth engine.

The best way to align a sales team to your business is how you measure and pay them. The adage that, “salespeople are coin operated,” is accurate, so setting up a compensation plan with the right metrics is critical. This not only enables and focuses the sales team, but it is equally important for executives and team members to understand what to expect from them. Of course, the #1 metric is sales revenue, but if your sales cycle is weeks or months long, can you wait that long to ascertain if the team is moving forward in the way your business needs?

Let’s explore some key sales areas and some common metrics associated with them that drive alignment and success:

 

Bookings and Billings

It is very rare to find a company that does not have clearly defined booking and billing metrics. Of course, if these metrics are not met, the rest is just a waste of time. The key here is to not make the goal the business owners “wish-list,” unless the underlying market, tools, processes and teamwork is in place. This metric needs to be challenging, but not demoralizing.

Common Metrics: Revenue by Product/Territory/Service, Market Penetration, % New Revenue, Year Over Year Growth

 

Quote Activity and/or Margin

Sales teams understand that they are a “pay for results” organization. However, in some industries, like when I was leading an electronic manufacturing services organization, the sales cycle is very long, and it is important that the sales team is “closing” every day. It may be a meeting with a key decision maker, or a demo to prospective buyers, but they must be closing (remember that closing is not only for purchase orders, and includes closing a new relationship, demo appointment, etc.). Measuring quote activity and margin increase alignment provide better, early indicators for sales success. Margin/value add is a particularly good metric to include in a sales plan for companies that can truly sell at a premium.

Common Metrics: Win Percentage, # of Proposals, $ Value of Proposals, Average Selling Price, Average Value Add/Margin

 

Target Meetings and/or Referral Meetings

In most industries, one of the most critical signs of success is early engagement with the appropriate target customers.   This may sound obvious, but early in my career I was involved with a company that had a lower opinion of sales due to one of their salespeople having brought in a “lead” to make candy.

They were an electronics company! An extreme case, but it would have helped to have early alignment and a better understanding of who and how often the sales team were engaging customers.

Common Metrics: # of Sales Calls, # Strategic Conversations, # of Social Media Interactions, # Tours/Meetings, # of Demos/Presentations/Educational Events, # of Referral Meetings

 

Pipeline Metrics

The sales pipeline is another area that most companies talk about and assess. My experience is that the information is very anecdotal (i.e., at the top of the funnel), there are few discussions around the probability and/or age of an opportunity, and size is valued over quality. A decent CRM (they do not have to be expensive), really helps in this area.

Common Metrics: Total Open Opportunities (# and $), % Strategic Market/Industry/Customer/etc., Average Age of Opportunity

 

Lead Generation Metrics

Lastly, lead generation is a metric for those companies that have a higher number of opportunities and lower average selling price. Many of the above metrics still apply, but this additional metric probably is required to understand the flow of leads and lead conversion.

Common Metrics: Volume of Leads, Leads by Industry/Market/Customer/etc., Response Time, % Followed Up On-Time, % Qualified, Conversion %

 

Setting up metrics and compensation plans can be quite daunting, but not as daunting as when your sales team is not performing, or delivering opportunities that do not support the company objective. Listed above are a lot of metrics. Please use them judiciously. More importantly, step back and assess what best practices drive the booking/billings you need and make sure metrics are in place and visible to the sales team. I have seen it make a crucial difference, and so will you.

 

 

Karl Berger is President of Fractal Sales Solutions which supports small and medium sized companies to achieve their growth potential. If you cannot tell, he loves process and metrics as proven by his Master’s Degree in Industrial Engineering with a thesis on Manufacturing Agility Metrics. To learn more about Karl please see his LinkedIn page   To learn more about how Fractal Sales Solutions can help you, feel free to contact him at karlberger@fractalsalessolutions.com