Estimated reading time: 4 minutes, 21 seconds
What are the right sales metrics to use to measure your business success? Darren Leishman, Managing Director at Spitfire Inbound, offers some suggestions.
Let’s assume you know what your profit and loss is. That’s a good start. But that tells you how your business is doing now, not how you’re likely to do in the future. There’s an art to identifying the future value of business your company is likely to close. It comes down to four key questions related to your sales metrics:
- Do you know if you’re getting the right leads?
- Do you know where your quality leads are coming from?
- Are those leads turning into deals that close?
- How long is it taking those deals to close?
When we started working with one of our customers to change from an outbound to an inbound methodology, their sales cycle was 50 days. Now it’s 30 days.
The difference is that their prospects are simply more informed now. They’re able to answer questions and move through the process in a streamlined way. We’re removing those points of friction by giving them answers before they think to ask the question. They don’t have to continually engage with salespeople or look elsewhere – we’ve already helped them. In fact, giving them answers before they know what to ask can actually prompt more questions to help them move through a sales cycle.
So what metrics are needed in order to answer these four questions?
First, start with the sales metrics:
Revenue source
You need to start by looking at where your revenue is coming from and focus on maximising your efforts in the areas that deliver the most value.
Total cost of acquisition
I’d advise against using marketing spend as the only measure of cost of acquisition. There’s also the sunken (but very real) cost of all the people working on a deal to consider – their salaries and all the other associated costs like computers, office space, annual leave, healthcare etc.
Deal close duration / sales cycle length
I’d advise you to never assume that the length of time from ‘awareness’ to ‘close’ is the real sales cycle length. It’s one measure but it’s the wrong one. Darren Leishman, our MD, is well known for saying “We’ve moved from calling a deal ‘closed’ when it’s won, to ‘open’. That way, we think of each new deal that has been won as the beginning of a long-term relationship with that client. A won deal is alive, not dead. “
“It’s also important to realise that sales cycles should decrease over time. They should get shorter as sales people become more knowledgeable and marketing teams know which channels to use to attract prospects.”
Number of Opportunities
Knowing the number of opportunities sitting in your pipeline ensures you have a view of how many deals could be coming in and the amount of work that will ultimately need to get done. It’s also important to assess your opportunities weekly and move them to the right deal stage in your pipeline to ensure you’re progressing each opportunity and removing the ones you feel won’t close. This will help keep your sales cycle and pipeline accurate.
Average deal value
It’s vital that you know the average deal size (the average sales amount of all your won deals). I find that this helps you flag deals which could be high-risk of not closing. I have learnt that a good mix of large and small deals is a healthy sign for most businesses
Win rate
And finally your win rate. This metric is important because knowing your win rate allows you to accurately forecast your deals. It allows you to discover which stages are the most difficult to get through and and how much cover is needed.
Next turn your sales metrics into marketing metrics:
Once we’ve understood the sales metrics, the next part of the journey continues – we have to build this back into marketing goals to allow us to identify the right conversion rates: not just from unknown to known, but from first contact to becoming a customer. And don’t forget to create goals for the number of contacts and sales qualified leads you want marketing to deliver.
In conclusion:
Predicting successful sales is more science, than art. If you can focus on what is likely to make a deal move through the funnel, put more in the top, focus on improving conversion and removing barriers to conversion, the inevitable result will be more business success.
If you're looking for some actionable and proven sales tips, download our guide on How to turn your entire business into a sales machine - this will set you on the path to sales and business success.
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