Speaker 1: Hi, I'm David Marincic with the Zamba Consulting Group, and today in Better Business Management, I'm going to offer you a beginner's guide to the five fundamental sales KPIs that you should absolutely be tracking as sales managers. Now, as a sales manager, a big part of your job is to identify, track, and understand key performance indicators, or KPIs. And that's so that you know whether and to what extent your team is achieving important business goals, and can then adjust your efforts accordingly. The fact of the matter is that going from the gut just isn't going to cut it anymore. Most well-run organizations use key performance indicators across various levels and departments to get as complete a picture as possible of where your organization is already succeeding, and also where improvements can, or in some cases, must be made. Thus, some of these KPIs can focus on high-level concerns, like the overall performance of a business, whereas others, and the ones that you're more likely to be overseeing, will focus on specific processes, departments, or even individual employees. So as a sales manager, then, where do you start for your department? Now, if you don't already have a lot of good data and process in place, the answer is actually pretty simple. We recommend you start off as simply as you can while still delivering value. As tempting as it may be to track and report on everything you can think of right from the get-go, trying to do too much can overload you and your team, and ultimately create more problems than it actually solves. Plus, what happens if you start tracking a bunch of dead-end data? That could result in a whole lot of wasted time and effort, and that, of course, defeats the whole purpose of tracking this information and trying to do something about it. So instead, we recommend starting with five core sales metrics and building from there. These five core KPIs are going to help you identify common bottlenecks in your sales process, and that'll enable you and your team to focus your efforts where they'll be most beneficial. Plus, you can always build on the basics later to create more granular or insightful or specific analysis as you hone your processes. So it's not like you're just stuck with these by starting with them. And remember, as long as you establish good long-term data collection, storage, and consistency practices, that data isn't going anywhere. So for this reason among others, we strongly recommend using CRM to do so if you're not doing that already. So the first KPI you should start with is quantity, and really that just means how many opportunities are in your sales pipeline. And digging a little deeper, how many of those opportunities are at each stage in your sales pipeline? Are there enough opportunities in your pipeline overall, or do you need to step up or adjust your marketing efforts? Are opportunities stalling at particular stages? These are the sorts of questions that you can answer once you've got some measure of quantity in your analysis. And you need to know the answers to these questions, especially if your company isn't hitting its sales goals, or if it's recently set more aggressive goals. The answer can be as simple as not having enough opportunities to win sales in the first place, but if your quantity is high and those opportunities are just sitting there, you need to know where they're stalling out and why. So quantifying your opportunities can help you to identify bottlenecks in that pipeline. And once you've done that, you can begin the work of identifying the issues that are causing those bottlenecks. So for example, are you having difficulty identifying who's likely to buy, or with tracking your interactions, or following up effectively? If any of those things are true, you're going to have difficulty converting opportunities until you can resolve the issues. Again, knowing quantity helps you identify those problems and ultimately puts you on the road to finding solutions. The second KPI we suggest you start with is size. Knowing how many opportunities you have is important. Quantity matters, but how much revenue are they likely to generate? In other words, how large is each opportunity? And that's what size tells us. It tells us the average opportunity size in terms of potential revenue. Size matters when it comes to sales. There's no getting around that, and it's a great way to prioritize your efforts. After all, if you've got a $15,000 sale and a $150,000 sale at roughly the same point in your pipeline, you're probably pumping more resources into the $150,000 sale. And that's smart. You should be. Size is also a good way to evaluate your lead funnel. If you're getting way too many tiny opportunities and not enough medium or large ones, you may need to adjust some combination of your marketing efforts, pricing scheme, and product or service offerings. The third core KPI we suggest you start with is velocity. Velocity simply refers to how quickly opportunities pass through each stage of your pipeline. So do they tend to stall at some stages or move more quickly through others? Knowing this is important. Velocity helps you prioritize opportunities, evaluate your efficiency, and enable accurate forecasting. So, for example, if you have an opportunity that is taking far longer to close than most, odds are pretty good that it's not worth nearly as much of your time as one that is of similar size and moving along on schedule. So velocity paired with quantity and size can offer you a pretty fair idea of your expected revenue for opportunities, which can really help when you're trying to plan your sales efforts for a given evaluation period. And velocity can also help you spot patterns if your opportunity progression tends to slow or stall at certain points. If those patterns emerge, you can focus efforts on identifying and fixing any snags or inefficiencies in your pipeline, which is tremendously valuable for you and your team. The fourth KPI we suggest you start with is quality. Quality simply refers to which and how many of your opportunities offer enough value to offset the time and money that need to be invested in that opportunity in order to win it. So quality is combining quantity, size, velocity, to ask a very simple but very important question. Is the juice worth the squeeze? Wins matter, but quality wins are the lifeblood of any successful sales operation. If the resources that you need in order to score a sale erase too much of the profit from that sale, you're probably better off putting it on autopilot and letting your team focus their efforts on higher-quality opportunities elsewhere. Understanding your opportunity quality enables you to maximize the profitability of your sales team. You are far less likely to overcommit to low-quality opportunities, especially sizable opportunities that might initially look lucrative, until we actually look at the quality of them. The fifth and final sales KPI that we recommend you start with is close rate. Close rate simply refers to the percentage of active opportunities that closes each evaluation or bonus period. Higher close rates are obviously better, but it's important to evaluate close rate alongside other metrics as well. A high close rate on too few opportunities may just not be good enough. The same goes for too many small opportunities, or too many low-quality opportunities, or too many low-velocity opportunities. You can also break your close rate down by size, stage, and velocity to get a better feel for what factors increase or decrease those close rates. Once you have this information, you can adjust your sales process to improve, fix, mitigate, maximize whatever you and your team need to do. For example, if you find that stalling for more than X amount of time during qualification is just the kiss of death for your close rate, then you've got a few options. You adjust your process to eliminate stall, you adjust your process to mitigate the effects of the stall, or you stop throwing resources at opportunities that sit at that stage for too long. What I hope you're seeing here is that as we combine these KPIs, we get a better picture of what to actually do with that information. If your close rate is much higher on opportunities of a certain size, your next move might be to break down those numbers and really try to dig into why that is. If you discover some secret sauce, you might be able to apply it to other opportunities. At the very least, you'll be in a better position to understand your market, build forecasts, and allocate resources for your team. Once you're ready to move beyond the basics, you'll likely want to track other metrics, especially as you're getting more sophisticated with your data collection and analysis. But again, quantity, size, velocity, quality, and close rate are really the five fundamental metrics you should be tracking from day one. And as you start to combine them, you can really do a lot with them. And the best part is that because these five KPIs are so fundamental, you're always going to have some use for them. They're going to be the building blocks for much of your analysis, even as that analysis gets much more specialized and more complicated down the road. But probably the best way to build on these basic KPIs is to invest in a CRM system. A quality CRM will allow you to more easily track many different metrics at many different levels of detail and to view and report on those metrics easily and effectively. Plus, if your CRM is well implemented, much of that data collection and analysis can be streamlined and sometimes even automated, which means that your salespeople spend more time selling and less time actually just entering data for you. Obviously, that's great. You want them doing what they're best at so that you can help them do it better. Now, I certainly hope that this video has been helpful. If you'd like to learn more about tracking sales KPIs or about how CRM can help you better manage and track those KPIs, please reach out to us at Azamba. We're always looking to help you out with that. In the meantime, thank you so much for watching and we'll see you next time. Take care. Bye.