Sales Indicators

Leading Indicators tell you the future

 

… and Lagging indicators tell you what just happened.

 

 

Leading or Lagging KPIs?

As managers it is our job to have a good view of our business, at all times. For this we look at our processes, and define some key measures along the flow. These measures, that tell us how much or how well we do things, we refer to as KPIs, or Key Process Indicators. Often you will see that any process is split into a sequence of process steps. This way it is easier to isolate and consider each step separately and study their charateristics.

 

When we measure things that go into a process step, to predict what will come out on the other side, this is known as a leading indicator. Leading indicators are generally more difficult to measure, but make it possible to influence the future result. Typical leading indicators will be focus around activity and capacities, e.g number of visits, meetings and proposals made.

 

When we measure on the result that comes out of a process, we talk about a lagging indicator. Results are per definition things that already happened. They are easy to measure, but are generally very difficult or impossible to influence. Typical lagging indicators are sales revenue, profitability, quantity sold.

 

 

Most sales organizations have focus on the lagging indicators of the business. i.e. Orders received. These are often easier to measure, and tend to be available through accounting, ERP and CRM systems. However, it is important that we also look at the leading indicators of our business to establish that we are undertaking the right amount of activities, of sufficient quality and in the right direction that will give us the results we need.

 

 

 

 

 

 

Activities Drives Sales

 

We should always look for leading Indicators when we want to see how we will be doing. Lagging indicators, such as last month’s sales numbers tell us what already happened (was sold last month). They say nothing about our coming months. When we are looking for predictability, and to plan our work we need to look elsewhere for guidance.

 

Many companies analyse the sales pipeline to predict future results. But the sales pipeline is just a static snapshot, it tells us how many opportunities there are right now in every sales step. In other words, what work we have invested to move each opportunity to where it is now. If we do not spend a minute of work on any of the opportunities at all for a month, our sales pipeline would look exactly the same a month later. The deals would just be delayed a month, except that we would probably lose some.

 

If you use Pipeline data, do look at the change in pipeline, rather than the absolute numbers. Examples of forward looking Pipeline KPIs you may want to consider are:

  • New Opportunity last 30days (Value and # of opportunities)
  • Time Opportunities are in same stage (per stage)
  • Number of transitions, forward movement between sales steps

 

These are the direct results of the amount of customer interaction that is done and of how well the interaction went, thus indirectly measuring quantity and effectiveness of Activity. We recommend however that you work with Activity data in an active way to complement these more traditional views. For this, it is important that calls, video, visits are registered. In our opinion, it is preferred that all activity gets at least a quick mention and an entry into the system. Prioritise getting at least some information about all activity, rather than asking your team to write long visit reports, as this almost guarantees you that only very few will be made.

Today, you need more leads than ever!

4 reasons you need more leads today than you used to

You probably already have a pretty good idea about your teams performance, monitoring basic sales process and metrics. You know how many leads enter in one end, and how many turn into qualified prospects, and later into deals. You are controlling your conversion rates and you are constantly trying to find ways to improve them.

Just increase the conversion rate and you will do well” is the common recipe.

Yes, increasing your conversion from lead to actual sales is of course important. But, a “conversion rate only” strategy depend on individual skills, and introduces a serious scalability problem. Why? Here are a few things to keep in mind:

 

Diminishing benefit per transaction

First, the benefit you get from every transaction is not what it used to be, especially in Software, the introduction of SaaS models, initial deals are smaller, you may find yourself with initial benefits/margin from the first contract not even covering your transaction cost. Over time and with Customer Success management, you will win it back many times – but in the meanwhile you need to finance your activity. 

 

 

B2B sales remain complex

But, you may say, a customer who used to need 5-6 months and 8 signatures to pass you an order of 100.000 Euro, today the same guy pay a subscription fee of 2.000 Euro/per month. At least one could expect the purchase decision to be easier for the customer. This is often not true. The decision to implement a software solution, is STILL associated with great risk later on in implementation and usage. 

For the customer, the main part of the actual transaction cost is not in the price, but in the implementation of new processes, adoption of new technology, the product cost over the whole lifecycle, perceived risk of cloud hosting etc. So, even if your contact could sign off on the initial contract, he or she will not take the risk without doing all the evaluation work, proofs of concept studies, and anchor the decision with his peers and managers, just like before.  

 

 

The “educated” Lead

Additionally, today your leads already come to your “shop” well educated. They have studied your offerings on the web, certainly also your competitors offerings, they understand the basic benefits of the product etc.

They find plenty of information on the web, before you even get a chance to talk to them. Even if you have got the lead through outbound activities, your leads will browse around to educate themselves before buying anything from you. This makes traditional selling even more difficult than say 20 years ago, and your transaction cost (“cost of sales”) increases.

 

Sales conversion takes sales skills

Increasing your win-rate, or conversion rate, from the leads that you have essentially depend on the skills of your sales reps. Meaning their personal skills on: how to create a buying vision, how to meet objections, manage the process… how to turn a sceptic prospect into a devoted believer. These skills take time to develop, and only a few reps will become real stars.

Long learning curve, and total dependence on your key seller(s), doesn’t really sound like a very scalable model to build your business on, does it?

 

 

Get the Lead-Machine working, and qualify well

 

You need more efficient ways of increasing sales than to just hire more and “better” sales reps:

  • Lead generation is key – build a lead strategy, get enough (online) qualified leads for your sellers. Traditional cold calling to people is dead, so you need to find other ways of reaching out. You need to create an abundance of good leads coming in. If you have few leads coming in, you risk having sales spend its days calling the same leads time after other, “loving them to death”, but… not selling anything. There is a lot of truth to what SaaS-sales gurus Aaron Ross and Jason Lemkin say in their bestseller “Predictable Revenue”: – “Lead Generation drives growth; Salespeople fulfil it”.
  • Work pipeline efficiency, rather than conversion. Get skilled at early qualification! (Or rather disqualification). It’s all in that first sales-call. If you can, specialize a group of reps for this phase, qualification, and make others good at follow through, negotiate and close the deals. Provided your lead generation phase provide you with working material, your qualifiers will dare do a real qualification, and use the right questions. See my article on Qualification and pipeline efficiency.
  • Be “data driven” – Make everything measurable – so that you actually know when you are improving and when you are not. Today there are plenty of good CRMs and marketing automation tools out there, from which you can get all kinds of statistics that help you work your efficiency.  (Also make sure you work the 100% adoption of these tools in your teams, see “love your CRM”)