Operating a business requires a basic understanding of financial management. Knowing the numbers is important in making good decisions. If your expenses are too high or sales are dropping off, you make changes. Do you know how many customers your sales team talks to every week? Many organizations don’t know the answer and are leaving thousands of dollars on the table for a competitor to get.
Ok, let me do a reality check. There are issues with starting to measure a sales team’s effectiveness. Typically, the measurements start with sales volume and other financial metrics. Make no mistake about it; I am a proponent of these. The challenge is to identify where the sales process can be improved before the close of the sale. When you can enhance salespeople’s actions from the start to the end of the sale, the closing ratio goes up significantly.
By now in your business life cycle you have some sort of a CRM in place. Various tools on the market are either simple or as complex as you want. Getting your sales team to log each sales action properly is yet another challenge and a whole article all to itself. So, with my disclaimers in place, let’s explore.
Measuring a salesperson’s success by the total revenue they generate is only one part of the equation. If a salesperson is selling $5 million a year, but leaving $5 million on the table, really, how good are they?
First, to be successful in sales, you have to talk to a lot of people. You also have to give a price to make a sale. Simple, right? Here is my rationale for a few sales performance metrics to get us started. Each CRM, as well as your organization, may call them something different, so please read between the lines if you will.
- Face-to-Face Contacts: This category measures how many face-to-face contacts a salesperson encounters on a day, week, and month. This could be a new prospect who has never been to your store or a previous owner who’s bought from you before or even a referral.
- Sold: Meaning the product is sold and delivered. Paperwork is done, financing is approved, and the checks have cleared.
- Write Up: Meaning that the salesperson quoted a price and then wrote the order. This doesn’t mean it’s closed, just that a written order was initiated.
Sample Questions About Performance
1. What percent of face-to-face to Sold do you think is a good number?
In the article, Relationship Selling: Measuring Sales Success, I outline the basics of measuring the types of customers most businesses have. The average closing ratio, many say is 20%. I think that’s a weak number and here’s why.
Long-standing businesses have repeat customers. What if your sales team has 100 face-to-face contacts in a month that are repeat customers? Do you think closing 20% is acceptable? I don’t. The salespersons selling process needs to be revised because they cost the business thousands of dollars. Factor in your marketing investment to get an ROI that’s not impressive.
Take each “unit” the salesperson sells and divide that by the total number of face-to-face contacts in a given time period. If you establish a salesperson has a 20% closing ratio, what if they could improve that 5%? A 5% increase would increase the “unit” sales. This is a “natural” increase to make more sales. It doesn’t cost you anything if you help your salesperson improve their effectiveness.
Your business should be closing at least 40%-60% of your repeat customers. Without measuring, you have wishful thinking.
2. What percent of write-ups to face-to-face contacts is a good number for an experienced salesperson?
Typically, a salesperson will share a price with a customer before they even qualify what the customer wants. This is generally because that’s one of the first questions a customer asks, “How much is it?” Salespeople feel obligated to answer every question vs. learning to control the sale through questions.
The rule of high volume and high margin sales is never price before you establish value.
A salesperson who verbally prices, especially if they don’t establish value before pricing, will have a lower closing ratio compared to a salesperson who makes written quotes every time they price. Increase the number of professional write-ups, and you will close more sales.
Eighty percent of all pricing should be in writing.
3. How effective is an experienced salesperson that sells 30% of their previous customers?
Let’s say you are measuring the type of customers your sales team is talking with. You know the percentage of each category. Every time a salesperson prices a customer and a sales is not made right then, the customer leaves the business.
Statistically, I know that most salespeople are not good with follow-up. Nearly 7 out of 10 don’t follow up within 24 hours after they price a customer who doesn’t immediately buy. Part of this is because sales managers often focus their team in the wrong direction due to various financial or inventory pressures. The other part is they lack a system as well as the verbal strategies to service the customer. Many salespeople are great at selling the sales manager on why they shouldn’t call back, or they wait on the customer to “get back to them” as they artificially promised.
If this experienced salesperson is only selling 3 out of 10 customers, what is happening to the other 7? If you have a sales team of 10 with a 30% ratio, look how much is being lost due to an inefficient sales process.
Measuring allows you to know the realities of how to improve your sales team’s behaviors and maximize your marketing budget.
Measuring tells you exactly where to influence the behaviors of your salesperson and sales team.
Learning to be Effective Starts with Performance Sales Metrics
Talking to a measured amount of prospects in a given period of time is just part of being successful in sales. There are only so many selling hours in a day, week, and month. Learning how to be effective with each contact starts the journey of successful time management.
By establishing value and knowing how to communicate that to a prospect, the closing ratio goes up dramatically, but so do the margins. A sales-driven organization takes time, energy, and the correct vision to have a highly competent team. What is your sales team performance sales metrics?
Read the complete series:
Part 3: Relationship Selling: Face-to-Face & Write-Ups (article currently being viewed)