The Right Sales Metrics

Like everything in this world, sales success relies on good planning. If not, you won’t know…

1.       Whether or not you’ll generate any income, or even make a profit.

2.       If you can satisfy your customers’ needs today? For example, have you made enough ice cream for an upcoming hot weekend? (I wish!)

3.       Whether you have enough stock, if its the right stock and in the right place?

4.       Do you have enough employee resource / capacity? For example, accountants wouldn't cope if all their team were on holiday in January!

5.       How many new customers will purchase this month?

6.       How many existing customers will buy this month, or delay purchases till next month, or have already left you for a competitor?

7.       How many leads will you generate from which source? .......and a million other things too!

If you don't know the answers to these questions, how will you know where to put your sales effort?

Essentially you must know what effort needs to be put in and where, to keep sales on track.

Indicators
I’m sure you have sales specific KPI’s, sales funnel conversion rates, sales pipeline predictions as well as regular and ad hoc sales activities to inform your thinking and forward planning.

But are you tracking the right metrics, so you focus on leading not following indicators, alongside past performance and future predictions?

Its all very well having key performance indicators (KPIs). But are they the right KPI's? Your business KPI’s should be split into 2 categories:

• Indicators that tell you how you have performed, and
• Indicators that tell you what might be happening in the future.

It is very common for business to have past performance indicators in place, but many miss a trick by not tracking leading indicators, so they are too late to react.

Here is an illustration to show how leading indicators work in practice.

Imagine that you ran a 50 seat restaurant. It is open six days a week for both lunch and dinner. A potential for at least 600 diners per week. If the average spend per diner is £29 per head, that's a projected weekly income of £17,400.

If your KPI is number of diners served and average spend per head then you can only use this to look backward. You can't correct any shortfall on income for the previous week.

Now, if you knew that 80% of your diners pre book then your leading indicator becomes the number of covers booked either a day or a week ahead. If only 40% of seats are booked, (and you generally have 20% walk-ins) you have 40% available to sell (60% capacity used).

By looking forward and seeing low booking levels before you get to those days, you can do something to change the situation. It’s a leading indicator.

You might consider a social media campaign telling people what is on the menu, perhaps offering a special deal or a complimentary bottle of wine. There are any number of tactics you could use to generate some additional sales for that day or week. The same would apply for hairdressers or anybody that has future bookings.

For a company that must generate leads to convert into sales, tracking actual sales doesn't help very much. Tracking leading indicators such as website visitors, number of lead magnet downloads, enquiries received, quotes requested etc, does help. All these are before the event indicators. So, if you see a fall in say lead magnet downloads then you know that this will negatively impact total sales in the future unless you do something about lead magnet downloads now..

You must know your conversion rates at each stage to make this work; at its simplest leads to quotes and quotes to sales.

Today your challenge is to review the indicators are you tracking. Uncover your leading indicators and start tracking those then you can do something about poor performance before it dents your income.

So, if sales planning hasn't been top of your list lately then today is the day to change that. So, whatever your sales targets are for this week, ask yourself what actions must you do to make sure that the right sales happen this week and for future weeks?

A fabulous, but testing challenge, is ask yourself - how you would manage a sudden upsurge in sales….. with a doubling of customers could your business cope……? Hit reply and tell me what you would do

PS: I'd love to how you get on. Let me know what leading indicators you are now tracking and what your conversion rates are..