Having a roadmap enables you to stay on course and reach the destination, no matter how much time it takes.
The thing is, sales goals look very attractive on-paper, treat them as the destination, the journey sales reps take to reach the sales goals, matter the most.
The experience helps them utilize the learning in the future and makes the next journey even smoother.
The same goes for defining the key performance indicators (KPIs) for your business.
It is easy to define them but, figuring a way to achieve them is a challenge.
However, in this modern, data-driven world, that challenge can be efficiently dealt with, once you figure out which metric will affect your primary KPI.
“What gets measured gets managed.”
The most significant way to simplify the many metrics is by grouping them as lagging or leading indicators.
Lagging indicators
- Lagging indicators help businesses measure actual results.
- The final score of your strategy and efforts is shown to you.
- Lagging indicator metrics are easy to measure, yet they are hard to improve directly.
- Every business’s primary KPI falls into this category.
Leading indicators
- Leading indicators measure all the activities that are critical to achieving business goals.
- These indicators lead to results, so they come first.
- These indicators are not easy to measure, yet are easy to influence and describe how to achieve business goals directly.
Leading and lagging indicators always work parallelly. They help businesses track their progress via final results.
Businesses can smartly work towards making these two provide them with the results they want (lagging indicators).
Once they know the goal (result), they can work backward and identify the necessary actions (leading indicators) for achieving these results.
Importance of leading indicators
Businesses can know if their sales is performing if they measure leading indicators.
Let’s take three scenarios where tracking leading KPIs is critical to the business.
1. Scenario One
At the starting of the article, we mentioned that it takes time to reach the destination. If you are not able to see results for the next 6+ months, you must check the leading metrics to know if you are on the right track.
For instance
Your business has a lagging KPI of $100000 in sales revenue with a 6-month sales cycle. Define one or more leading indicators like the number of calls/emails/meetings or the pipeline size. This will help you ensure that you’re on track and will close your deals with your lagging KPI.
2. Scenario Two
You must get a new process in place if you want to get something done. Businesses must track leading KPIs and treat them as benchmarks throughout the process.
For instance
Businesses implement better sales processes for reducing their sales cycle length. They must also measure how much compliance they are getting from their sales reps regarding this new process. Leading metrics help in providing the right context for the length of time it takes to complete each step.
Track the time it takes for a marketing qualified leads (MQL) to become a sales qualified lead (SQL), and then from SQL to sales accepted leads. Also, measure the time it takes to send out the proposal.
3. Scenario Three
As we have mentioned earlier, measuring the results, i.e., lagging indicators. At times, you will get bogged down by complex lagging indicator and will require more specific leading metrics to know the final result.
For instance
The objective of your sales team is to be innovative in the way they do sales. To do so, you will need your sales team to define their strategy of gaining innovation.
The innovation strategy often depends upon the industry your business belongs to. Tracks metrics such as the number of ideas generated, innovation pipeline, percentage of adoption of the new feature.
The definition of KPIs
KPIs can be defined as the metric that businesses use to measure their overall performance in generating revenue.
And it is not a hidden fact that revenue acts as the fodder which keeps them alive in this competitive environment.
For most business organizations, the sales budget is atypical KPI.
The sales budget specifies what revenue each sales representative must bring in during a specific period.
Being the most important goal to focus on, sometimes, that goal is not met.
This is where KPIs come into play as they help businesses understand the reason behind inevitable failures.
They also help businesses identify what actions were to be taken to avoid the failures and how to deal with situations in the future.
Let’s help you understand KPIs with these three typical situations.
A. Status meeting
- Sales managers and sales representatives conduct a monthly status meeting.
- Any sales rep that is behind the budget will explain how close he/she is to seal the deal with a new customer.
- Closing this deal means a lot to hat one sales rep as he/she knows how crucial it is to reach the sales goal for that quarter.
- The status meeting focuses on turning this prospect into paying customers and helping out this sales rep, and a few more sales activities are discussed too.
B. Sales budget
- The sales department starts preparing for next year’s sales forecast.
- This sales forecast is being created based on the current sales activity, combined with previous years’ activities and the performance of individual sales representatives.
- The budget itself is discussed upon, and sales professionals try to find out how much data-driven facts have been considered while setting this budget.
C. The departmental blame game
- Sales and marketing managers are discussing the reasons behind a lack of sales.
- The sales department points out that not enough marketing is being done and they lack sales-ready leads to work upon.
- Marketing reverts that the sales-ready leads were not followed upon in-time by the sales department.
- The chaos which is keeping both the department from taking further and right action is defined in this scenario.
These examples are fitting to the fact that chaos follows the business process that defines KPIs as results and not as activities.
Start defining KPIs as Activities
While preparing budgets, the responsible team always looks at the results this budgeting will bring. Meeting this sales budget, by hook or crook, is what matters to them.
However, best performing organizations break their sales process into measurable activities.
Successful sales is the result of certain predictable activities — and a decline in sales occurs due to the negligence of these activities.
We are sharing some examples with you that will help you understand the activity-based KPIs:
- Calling a certain number of potential customers
- Making a certain number of follow up calls
- Completing specific numbers of sales meetings
- Conducting a certain amount of product presentations
- Sending out a certain number of written offers
- Sending emails to a certain number of customers
We would be honest with you. Not every activity we have mentioned above leads to a business deal. Yet a certain percentage does.
Businesses must set goals for their individual sales activities and track them. This will allow them to
1. Improve their sales management
- Businesses need knowledge about the relationship their activities and results shared.
- This knowledge will enable them to use sales tools such a sales CRM more efficiently.
- Such a tool can help the organization in managing their sales, conduct better sales reviews, prioritize better sales activities, and forecast sales.
2. Utilize practical sales tools
- The sales representative will get a better sales tool to carry out their sales activities.
- Working with set pieces of activities using practical tools makes the sales process more comfortable.
- The more practical their application is, the more beneficial these tools will be for the businesses.
3. Have a more efficient dialogue
- When the managers have data in front of them, finding loopholes in the activities becomes easy.
- Once these loopholes are discovered, managers can conclude the meetings with better strategies based on the results they have derived after the sales reps performed the activities.
- The same can be said about inter-departmental dialogues too.
- No more chaos, just data that helps plan future sales strategies for the individual departments.
Conclusion
The points that we have mentioned above will allow businesses to register better sales figures by achieving the sales activities in a timely fashion.
As we mentioned above, having a tool like a sales CRM will be of great help. Modern CRM tools are cloud-based and are less clunky than their predecessors.
The sales and marketing department of an organization can share the information shared inside the sales CRM and track the activities set for the success of sales. These activities are tracked, and their results can be turned into insightful reports.
All the functionalities that a modern sales CRM provides help organizations to complete their sales activities more smoothly.
Salesmate CRM is one such smart sales tool.
It is a budget-friendly, intelligent sales intelligence tool that enables businesses to do more work and keep the busywork out of their business process.
Salesmate CRM has a lot of features at competitive pricing that can be of great use to businesses struggling to track their sales metrics.
If you need to know more about these features and how they can be handy in solving your sales worries, then do get in touch with us.
