The sales process is the first process in your company’s cash cycle, so measurement here is crucial to success down the line. You have a lot of options, so you need a context to determine how you are going to be measuring performance in sales. First, what sandbox do you play in? This means what does your company sell? To whom do you sell, and where are your customers located? Second, what are your strategic intentions? What is your 3-year BHAG (big, hairy, audacious goal) for the business, and how much of that are you expecting to accomplish this year? This quarter?

Key Performance Indicators (KPIs) measure your progress toward your desired strategic outcomes. Some of them remain consistent over time, so you can compare this period’s results to a prior period. Some are derived by looking at past performance and identifying patterns. For your sales performance, you might want to gear your KPIs toward

  • Gross sales volume, or % performance toward a monthly target, average sale $
  • Profitability of sales (gross margin on sales)
  • Volume from new customers (% and/ or $)
  • Customer retention rate
  • Sales cycle time
  • Quote to close ratio

Some of your KPIs (like the ones listed above) will likely be looks in the rear view mirror. But you can’t determine future direction by focusing only on where you’ve been. If you are measuring only based upon results and the sales cycle times in your industry are long, it could take you months to determine whether an individual or group is effective. That means that you can incur significant cost and risk before you fix a problem. You need some KPIs that are predictors of future success, leading indicators.¬†Activity based KPIs measure your interim results:

  • # of Prospecting Calls, % of monthly goal
  • # of Inbound leads
  • # of Sales qualified leads
  • # of Marketing qualified leads

We have described KPIs that are primarily around the behavior of salespersons. But there are other factors in the effectiveness of the sales portion of your cash cycle. If your sales cycle isn’t producing the results you want, you have 3 categories of options from which to choose:

  1. Reduce errors in the sales process (bad quotes, order entry errors, etc.)
  2. Find ways to speed up your sales cycle time
  3. Change your model (online vs. in person sales, etc.)

If you choose to make changes, build KPIs around them to test their effectiveness.