Metrics are important. They provide a means of helping us understand whether we are on target to achieving our goals. They also give us insight into potential changes in the market.
As we “instrument” more of the selling process, whether through CRM, mobile tools, and other means, we have the capability of measuring many more things than we have in the past.
Recently, I was doing some reading on metrics.
One group recommended tracking the following: Meetings/Opportunity, Time between touches, Opportunity conversion, Untouched opportunities, Contacts per account, Follow up meeting ratio, Opportunity progression, Email engagement rate, Total opportunities engaged, New opportunities, Meetings, Contacts per account, Average opportunity size, Bookings per meeting, Account type, Discounting, Average opportunity age, Follow up meeting ratio, Average time in stage, Stuck opportunities. Roughly 20 key performance metrics for sales person effectiveness.
Another suggested: Monthly sales growth, Average profit margin, Monthly sales bookings, Sales opportunities, Sales target, Quote to close ratio, Average purchase value, Monthly calls per person, Monthly emails per person, Sales per rep, Product performance, Sales by contact method, Average new deal size, Average new deal sales cycle, Lead to sale %, Average cost per lead, Retention and churn rates, Customer lifetime value, Average conversion time, New MRR, Expansion MRR, Number of monthly onboarding calls, Number of demo calls. Roughly 23 metrics, both individual and organizational (which is simply the roll up of individual metrics).
And another suggests: MRR, CAC, LTV, Churn rate, Burn rate, ARPU, TCV, ACV, Number of active users, Number of registered users, Month on month growth, Total revenue, Gross profit, Gross margin, Produce usage/engagement, Net promoter score, TAM, New vs return customers, Renewals, Number of trial sign ups, Free to paying customers conversion, Surprisingly, for a SaaS company, they don’t measure Win rates, Sales cycle time, Number of meetings/calls, SQLs, MQLs, etc.
I could go on and on, the point is, the increasing data gives us the ability to analyze that data in any number of ways and to create endless metrics/goals by which we assess performance. But which of these all these things that we can measure and track do we pay attention to, how do we leverage them most effectively? Stated differently, just because we can measure a lot of things we have never been able to measure in the past, doesn’t mean we need to measure everything.
For example, for a sales person, while you can track and measure them on any number of the metrics outlined above, doing so on all the metrics can be confusing and misleading. I’ve seen sales people being measured on as many as 20 metrics.
Sales people will wonder, “Which of these 20 or so metrics should I pay attention to? Which is most important?” They can’t manage to all of them, if they try, they end up accomplishing nothing.
In reality, these are all very interrelated. Positive or negative changes in one area ripple through and impact most of the others. If we aren’t doing enough prospecting, we won’t have enough qualified opportunities, and we are highly unlikely to make our numbers. If we have declining win rates or average deal values, or increasing cycle times, then our ability to hit our goals is threatened.
Instead, we have to think about “What are the 3-4 metrics that are most critical to understanding whether the sales people are on the path to achieving their goals?” For example, it may be as simple as number of weekly prospecting conversations and healthy pipeline metrics.
The fewer metrics enable the sales person to focus on the things most critical to achieving their goals. If we understand the interrelationships between the metrics, we can see if they are doing the 3-4 things most critical to reaching the goals, all the other metrics are probably going to be in the right range.
Where the other metrics start coming into play is when we start missing our goals in the 3-4 critical metrics. We can drill down into the interrelated metrics to try to better understand what’s going on and the potential issues standing in the way of achieving the goals.
Sometimes, the focus on metrics becomes an end in itself. Focus starts to be on achieving a certain metric, but not understanding the cause-effect or quality relationships between metrics. For example, we focus on meetings to achieve a meeting goal, forgetting to understand why we need meetings in the first place, whether they are the right meetings, and so forth.
Sometimes our coaching follows the same line, we focus on the metric itself and not what is impacting the ability to achieve the metrics. For example, the coaching conversation that goes, “You aren’t achieving your meeting goals, you need to up the volume of meetings you have…” is very different than, “Why aren’t you able to achieve your meeting goal, what might you change or do differently to make your meeting goal, how might I help you?” Or sometimes, we might discover, “The results you are producing with the meetings you are having are far better than we expected in setting a meeting goal. What you are doing shows you are meeting your overall goals—we probably should adjust the meeting goal….”
- We have an incredible ability to measure lots of stuff in sales. Just because we can measure lots of things, doesn’t mean we should.
- Most of the key metrics are interrelated, as a result, if we choose the right 3-4 “cornerstone” metrics, we can make it easier on the sales people to do the job we expect them to do. The other metrics may be supporting metrics that help us identify and isolate problems if people are missing some of the key metrics.
- Metrics don’t solve performance issues, they just help identify potential issues. We have to get under the numbers, understanding what they mean to identify and address the performance issues. Metrics and goals are just numbers, they don’t tell us what happened to cause the numbers.
- While I didn’t discuss this, we tend to obsess on trailing metrics–the problem is, by their very nature, by the time we see problems, it’s too late to do anything about them. We need to understand the linkages between the trailing metrics, and those that lead them, so we have the opportunity address performance issues early enough to have an impact.