On several occasions in this blog, we’ve shared how maintaining accurate data and metrics in a CRM, and leveraging such data to make informed business decisions, helps produce accurate forecasting you can count on. During a recent study we conducted with Selling Power, we found that best-in-class sales teams do just that – identify metrics that impact pipeline and drive growth. A few weeks ago, I touched upon this idea briefly in my webinar. Now, I want to circle back and share four key metrics that you should pay attention to as they can have a substantial impact on the health and growth of your sales organization:
The Number of Deals in Your Sales Funnel
One key metric you want to keep track of is how many deals are in different stages of your sales process at any given time. Best-in-class organizations should set up a sales process that closely aligns with the buyer’s journey and tracks how deals and opportunities move through each stage. This allows you to calculate the average time it should take for a deal to advance from stage to stage and quickly identify opportunities that become dormant and no longer advance. It also allows you to spot trends and areas of improvement by identifying recurring problems. For example, it could be that your prospects are not fully engaged and nurtured during the sales process, or it could be that many deals fail at a certain juncture. Monitoring and analyzing the sales funnel can reveal problem areas that may originate with individuals, the entire sales team, or worse, your sales process.
But how do you determine the ideal number of deals that should go through your sales funnel? This number can vary widely based on factors such as the size of your organization, product portfolio, geographic location, or industry. Look at it this way: If 30 percent of your total sales funnel turns into customers, you want to make sure that these 30 percent are enough to satisfy your annual revenue targets. To do that, you’ll need to aim at generating 70 percent or more of additional opportunities throughout the year.
Average Size of Deals
Another key metric to pay close attention to is average deal size. Analyze data from the past to get a sense of how many deals were won each year. Then, introduce your annual revenue goals into the equation and divide the desired revenue goals by the number of deals expected to close. This should give you a sense of how much your average opportunity size needs to increase (or, going back to the previous notion regarding your sales funnel, how many additional leads and opportunities you need to generate).
Please note – as with most of these metrics – you should separate your data into more granular sets of groups. For example, your sales organization may sell to enterprise accounts as well as to SMBs. Their sales processes and targets should be separated and analyzed individually. A one-size-fits-all approach to determine average deal size will not give you the data you need if you combine deals that are vastly different in complexity and size.
We keep the term “Conversion Rates” ambiguous on purpose because there are many conversion rates that should be tracked and analyzed that will have an impact of driving growth, in particular:
- Lead Conversion Rates (this will sustain pipeline growth)
- Opportunity Conversion Rates (to grow the sales funnel)
- Opportunity Win Rates
Beyond that, there are more granular approaches to measuring conversion data, including by opportunity owner, lead source, or campaign.
In a nutshell, conversion rates are indicators of the quality of your leads, the productiveness of your team members, and the effectiveness of your business development efforts and sales processes as a whole. A drop in conversion rates will signal that reaching revenue targets might be in jeopardy.
Existing Account Growth
Existing account growth is an important metric and factor that supports revenue attainment goals. There are many reasons why an already established business relationship should be a key factor of revenue growth strategy, such as:
- Built-in trust and brand recognition
- Recurring revenue streams through cross and up-sell opportunities
- Comprehensive understanding of client needs
Rather than merely managing clients, your sales force should think of improving a customer’s overall satisfaction to increase retention, reduce churn, and provide growth.
Tracking your prospecting metrics is essential to maintaining a healthy pipeline. It helps provide sales reps with a very clear understanding of the activities needed to build a powerful pipeline and regularly exceed quota. Through a realistic understanding of the metrics that impact prospecting, you will be in a better position to forecast effectively, make real-time course corrections, and discover areas where your teams could benefit from sales training or targeted coaching to improve performance.