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Set Your Sales Goals Using 4 Steps to Help Your SME Grow
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For an elite athlete, numbers mean everything.
It is normal, a few centimeters or a few seconds is the only thing that separates the champion from a runner-up.
This is why sportsmen and women are obsessed with metrics, numbers and statistics.
And that's why the best commercials are also obsessed with numbers.
Specifically with sales KPIs.
What are Sales KPIs?
The term KPI (Key Performance Indicator) and is ultimately the numbers or metrics with which to assess the performance of an area.
In the case of sales KPIs, the commercial area.
Why are these sales KPIs important?
In the bestselling book Fanatical Prospecting, author and sales consultant Jeb Blount tells an anecdote that is repeated in countless sales departments around the world.
Blount describes how one afternoon, someone came up to talk to a slightly dejected salesman from his company.
The salesman explained that the day was not going very well and he thought he was not going to close any deals. Trying to find out why, Blount asked him how many calls he had made today in total.
- I estimate about 50. - The commercial answered.
Later, when they went deeper into the data, they realized that they had not even reached the twenty calls.
With further analysis, they discovered that it had happened: after a bad run in the first calls and several abrupt rejections, the commercial was spacing out the calls more and more.
This is not a problem. The best-selling commercials are having a bad day too.
The problem is that the commercial had no idea that his performance was plummeting or why he was doing it. By not following the numbers, he was blind.
What are the most important sales KPIs?
To talk about the most important sales KPIs we have to differentiate between individual sales KPIs for each salesperson and global sales KPIs for the company or the sales department.
What are the sales KPIs of a salesman?
Any salesperson who wants to keep a good record of their numbers to improve their work has to concentrate their KPIs on their sales funnel.
Imagine a commercial who works mainly by phone and cold door, his most important metrics would be:
- How many calls do you need to make to get a prospect.
- How many calls you need to make to a prospect to get a meeting.
- How many meetings must you have to close a sale.
Before going deeper into these numbers, it is necessary to understand the difference between efficiency and effectiveness:
- Efficiency understood as a measure of work: 100 prospecting calls in an hour.
- Effectiveness understood as the relationship between work and result: 15 contacts in 100 calls.
So yes, if you make 100 calls in an hour, but don't get any new leads, your ratio is 0%. You have wasted your time and you have been ineffective.
However, if you only make 10 calls, but get a great lead, your ratio is 10%. You haven't been very efficient, but you have been effective.
The key here is to find the most cost-effective balance between effectiveness and efficiency.
With that in mind, the KPIs of a commercial would be:
- Success rate of cold call to lead.
- Success rate of call to meeting.
- Success rate of meeting for sale.
So, if on average, with every 10 calls he gets 1 lead, every 5 leads a meeting and every 2 meetings 1 sale, the salesman knows that:
- You need 100 calls to get 10 leads.
- You need 10 leads to have 2 meetings.
- You need 2 meetings to have 1 sale.
- In short, you need to make 100 calls to get a sale.
People are disastrous at counting these kinds of metrics
The main reason why the commercial they talk about in Fanatical Prospecting had failed so badly in estimating how many calls it had made during the day is that people are lousy at this kind of counting.
Fortunately, technology easily solves this problem and allows any salesperson to keep a close eye on their KPIs.
And the best tool to do this is a CRM like efficy.
Find out if efficy is the best option for your business
What are the important sales KPIs for a sales department?
For any sales department in the world there are 3 absolutely key metrics:
It is not a metric as such, but it affects the others so much that it is worth taking it into account.
The sales price will influence:
- How does a prospect see and value your service or product?
- % of conversion from prospect to client.
- Final value of a client.
Monitoring how different sales prices work based on various aspects should be a must for any sales department.
Lifetime Value
Based on how much a customer pays for your product or service and the number of purchases they make before becoming inactive, a customer's Lifetime Value (LTV) is calculated.
If you sell a €400 product and on average a customer makes 1 purchase a year and does so 3 times before becoming inactive, your LTV is €1200 over 3 years.
This metric is fundamental both for making future economic forecasts and, above all, for calculating the maximum CAC you can afford.
The CAC (or Customer Acquisition Cost) is the last great metric of a sales department
The CAC is how much money you have to spend to get a client. You should allocate the salaries of the people involved in the recruitment, the means they use to recruit them, advertising and, in short, all the items related to the achievement of a client.
To define the maximum CAC that a company can afford, one must take into account the life cycle of its client, its financial muscle and its cash needs, but in general, few businesses can support CACs greater than ⅓ of their client's LTV.
Other important sales KPIs for SaaS-type businesses
Behind these more general metrics, there are other metrics specific to some business models. This is the case of subscription models such as SaaS (software as a service) in which 2 of the most important metrics are MRR and ARR.
What is MRR?
The MRR (Monthly Recurring Revenue) is the amount of predictable, monthly revenue that a subscription company (such as an SaaS) receives each month.
This metric is key in these business models because it allows planning and makes it easier to measure growth.
What is ARR?
The ARR (Annual Recurring Revenue) is the amount of predictable income for a subscription company on an annual basis.
In short, the ARR is the annualised MRR.
The best way to manage these metrics is with a CRM
As with the particular performance of each salesperson, the best way to keep track and follow up on your company's main sales metrics is with a CRM.
That's why, if you want, we can show you how efficy works and how we can adapt it for you.
Find out if efficy is the best option for your business. Get a Free Trial!
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