Typical Sales Metrics…for sales managers who have never sold before.

6 Mar

Never been a sales person but now you find yourself managing a group of sales people?

Whether you’re the CEO of a midsized company or a senior manager who has been assigned the task, you’re going to get a lot of well-meaning suggestions on how to manage.  Press hard on results!  Inspect what you expect!  Always move out the bottom 20% of performers!  If you don’t show a willingness to move out non-perfomers then you’ll never gain their respect!  Expect a lot and you’ll get a lot.

Well I will offer up a suggestion also, based on decades of managing hundreds of sales people.  Here are a few thoughts for you to consider before I offer up some management metrics;

  1. Sales people are people.
  2. Sales people are one of the only employee groups that have to fill up their own in basket.
  3. Sales people are one of the few employee groups that have to fight through 5 failures to get one success.
  4. Sales people are one of the few employee groups where 30 to 100% of their compensation is entirely dependent upon their skill, will and tenacity to persevere on a daily basis.
  5. Sales people are the only people who actually go out every day with the sole focus of building your top line revenue.

If you’re going to be a successful sales leader then you should expect a lot.  But you won’t get a lot unless you give a lot…of yourself.

Okay so here’s the metrics I promised.  You should first identify the sales process (cycle) because all sales metrics spin-off the sales cycle;

  1. Suspects – a list of prospects who are likely to be qualified for your products or services.  Most companies buy lists of prospects.  Most people call them “leads”, but that’s a misnomer.  Leads are qualified prospects who have indicated an interest in knowing more about your product or service.  If your database of suspects have not responded to your marketing efforts then they are suspects. 
  2. Prospects – These are suspects who have been qualified.  Generally qualifying prospects has to do with financial ability, a potential fit as a target and is likely to have latent or blatant need for your product or service.
  3. First Presentation – A first meeting between your sales people and a prospect.  There is an exchange of information, your sales person is trying to qualify the prospect and uncover those latent or blatent needs.  The prospect is trying to decide if further discussions warrant any further investment of time.
  4. Needs Analysis – The sales person has found out enough about the prospect to see a good business fit and the prospect sees enough potential benefit to investigate the opportunity in more detail.  This stage of the sales cycle is all about investigation.  The results of that investigation will populate a proposal which is usually presented in the form of a proposal.
  5. Formal Presentation – Your sales person has worked through contacts, influencers, gatekeepers and key influencers to get decision makers into a formal discussion of the needs analysis findings.  The sales person uses this meeting to shape a discussion around the business fit of a business relationship.
  6. Decision Pending – This is where great sales people separate themselves from good sales people.  A good sales person has done an excellent job in the formal presentation and awaits the answer.  A great sales person has developed their contacts over the previous five stages to turn-key influencers into coaches.  They artfully work those relationships so they have enlisted several “internal sales people” who are selling the product/service even when the sales person is not there.
  7. Negotiation – Usually at this stage the prospect is trying to shape the offering to further fit their needs around price, performance and image.
  8. Program Approved (Implementation) – At this stage a good sales person will hand off implementation to an account manager or service group.  A great sales person will stay intimately involved until they are sure the new client gets precisely what they wanted, and that their employer gets all of the potential revenue & account penetration possible.

Okay…so where’s the metrics?

The metics that define the effectiveness of the sales person are the success ratio’s (conversion or close ratio) from First Presentation (step 3) to Implementation (step 8).  For business to business sales people the overall close ratio is usually around 16%.  In other words for every 6 new prospects that a sales person meets with will become a new client.  And here’s your AHA moment.  If you have a sales person who is falling dramatically below expectation you have a choice to make.  You can fire them and hire another sales person.  I will warn you that you only have a 1 in 3 chance that your new sales person will be better than the one you just fired.  Your other option is to peel this onion back another layer and find out why that sales person is failing.  If you’re willing to invest that time your odds of improving results are greater than 1 in 3!

Here are some pretty dependable step by step close ratios;

  • 80% of prospects who receive an effective first presentation ( Step 3 ) will want to understand the potential benefit ( Step 4 )
  • 65% of prospects who participate in a needs analysis ( Step 4 ) will be willing to coordinate a Formal Presentation ( Step 5 )
  • 85% of prospects who participate in a Formal Presentation ( Step 5 ) will make a decision ( Step 6 )
  • 60% of prospects that make a decision ( Step 6 ) will want to negotiate ( Step 7 )
  • 60% of prospects that negotiate ( Step 7 ) will eventually implement ( Step 8 )
  • 16% of prospects that will receive a First Presentation ( Step 3 ) will eventually become a client ( Step 8 )

If you’re willing to peel back one more layer you can set up a sales excellence template.  Let’s say you need for sales people to deliver 16 new average sized clients every year.  You can now take that goal and run it backwards through your sales cycle and create a template.  On an annual basis your sales people should have a sales pipeline that looks like this;

  • 100 First Presentations
  • 80 Needs Analysis
  • 52 Formal Presentations
  • 44 Decisions Pending
  • 26 Negotiations
  • 16 Implementations

 

So now you know all the metrics you need to know.  But what are you going to do with that underperforming sales person?

If you compare an individual’s sales pipeline to the sales excellence template you can easily identify exactly where that struggling contributor is failing.  For instance you may find that sales rep. A is failing miserably.  But on further examination you see that they are extraordinarily good in the latter stages and extraordinarily weak in the early stages of the cycle.  Conclusion?  Improving this sales person’s ability to set appointments and make compelling first presentations may turn them into a sales star!  In other words…why start from scratch and take on all the risks of a new hire until you know if you can help struggling performers catch up?

Next steps?  Meet with your sales team.  Get them to validate your sales excellence template and step by step close ratios.  Then run your meetings based on these metrics.  Strugglers will begin to see where their pain is and ask for help.  If you are willing to help them…they will always return the favor ten fold.

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7 Responses to “Typical Sales Metrics…for sales managers who have never sold before.”

  1. Kathy March 8, 2010 at 3:22 pm #

    I think you created a great article. I like the process steps you included as well as the stats. Certainly much more can be said about what happens when you take over a team. And you hit on a great point – understanding why someone is not performing, finding out their blocks, or what is in the way, opens up an opportunity to “save” that person and learn in the process what they think is missing. In my own prior corporate experience I would have lost some incredible sales people had I not taken the time to learn what might help them turn the corner. New managers are always eager to turn things around swiftly and present a profitable increase. Saving hiring dollars with this one act can offer them a double win!

  2. Duncan Law March 12, 2010 at 6:39 am #

    Great stuff as always, Greg. I’d like to post on my blog.

    • gregdeming March 12, 2010 at 7:20 am #

      Feel free Duncan, please make the appropriate notations. Thanks.

  3. Duncan Law March 12, 2010 at 7:44 am #

    Absolutely-should’ve mentioned that in my comment.

  4. Partner Profile Boy April 20, 2010 at 2:51 am #

    Best post I’ve ever read so far to today. Nice statistics and all. You have a very good point and nice perspective.

  5. April October 26, 2010 at 4:26 pm #

    Very good article! Sometimes attitude can be one of the biggest contributors or detriments to a salesman’s numbers.

    http://www.flickr.com/groups/swcompany

  6. Rick July 5, 2012 at 7:56 am #

    Thank you for this. Got me thinking about the basics of Sales lead generation, needs analysis, and how this might be applied to an agent situation vs direct sales force.

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