Over the years I have been surprised to see how many business owners and managers measure their total sales, cash flow and profitability – and micromanage where not necessary – only to fail to give consideration to individual measurements that can really help them understand their business. This is particularly so in sales.
KPIs (Key Performance Indicators) are a critical tool for any manager wanting to stay on top of their business and understand underlying trends – in sales it is no different. Measuring sales efficiencies at different points in the business (individual, region, product etc) can provide indications of poor performance and allow early intervention.
Here are several simple measurements that can be considered when determining an individual salespersons efficiency:
- Personal sales as a percent of total sales. How much are they delivering to the business?
- Sales call by type. The number of calls the individual has made within a given period of time and the revenue that have been generated per call. This may be broken down into cold calls; leads followed up, repeat business etc.
- Cost of sale. For every dollar paid to the individual sales representative, how much revenue do they return to the company?
- Gross margin dollar per cost dollar. For every dollar paid to the individual sales representative, how many dollars of Gross Margin do they return to the company? This will reveal discounts and therefore individuals who may be selling on price alone.
- Revenue from new business a sales person generates.
- Repeat business revenue a sales person generates.
These basic but practical measures are just an example of what can be used to get an accurate picture of the efficiency of an individual or sales team. Where an salesperson is failing to meet targets, KPIs can help identify specific areas of weakness or underperformance and allow managers to take appropriate action.
What you measure will vary from business to business, the sales approach your company takes and any specific areas on which you need to focus. There is plenty of information available online to help you determine the most appropriate KPIs for your sales team or overall business. What is important is to remember the old management adage that has stood the test of time, “If you can’t measure it, you can’t manage it“, so start measuring.