When things are going well and your sales are up, you can sit back and relax, right? Wrong! Business leaders tend to sound the alarm when sales are already down – but if you’ve waited until your revenue has dipped, it’s already too late.
Find out why the best time to question your approach to revenue generation is when your sales are up, and the three leading indicators you should consider when doing so.
Why You Shouldn’t Wait for a Dip in Sales to Optimize Your Sales Process
Imagine you’re walking along in the mountains and you take a path going down toward a valley. If you go too far in that direction without being sure that’s the way you want to go, it’ll be a long hike back up.
If you’re already at the bottom of a sales valley when you realize you need to do something about it and ring the alarm, you’ve clued in much later than you need to and have made climbing back up the mountain very difficult.
Typically, sales are measured at the end of a quarter. When sales are trending down, business owners often don’t sound the alarm because they assume it’s just a temporary dip. The next thing they know, another 90 days have gone by and they’re in the valley of despair, sounding the alarm that something needs to be fixed.
Unfortunately, two quarters have gone by and now there are only another two left to get sales back up. In other words, an entire calendar year can be negatively affected if course corrections aren’t made in the first quarter or two.
So, what can you do to make sure you’re not too far down the valley before you realize sales are going to dip? What you need is a map that can help you continue your journey without losing elevation. This is where leading indicators (KPIs) come in.
The Top 3 Indicators for Assessing Sales Performance from a Fractional VP of Sales
If you’re a business owner and you want to significantly decrease the number of times you find yourself in a sales valley, you need leading indicators in place that you and your team follow diligently to understand if and why your sales are going to go down. These are the top three sets of indicators to consider.
Leading Indicator 1: Sales Activity Levels
This category of indicators looks at crucial activities that lead to revenue down the road. If two or three weeks go by and sales activity levels are below where they should be, it is virtually guaranteed that it will lead to a low-revenue month.
There are many specific indicators you could choose from, but the top three must-haves are:
- On a per-sales rep basis, how many sales calls or meetings with potential buyers are happening per week?
- How many proposals are being sent out weekly?
- How many hours per week does the team spend prospecting?
In my role as Fractional VP Sales, I often encounter sales leaders in small to medium enterprises who are not comfortable checking in with their salespeople about these indicators because they don’t want to be perceived as micromanaging. If you want a clear picture of whether your sales are on track or not, you need to keep track of these metrics.
Leading Indicator 2: Top-of-Funnel Health Check
The next set of crucial indicators for assessing and optimizing your sales process relates to the top and middle of your sales funnel. Bearing in mind your conversion rate from proposals issued to deals won…
- At the top of the funnel, you should have at least three times the revenue opportunities that you need to meet your target for a given period. For example, if your monthly target is 100k in revenue, you should have 300k worth of opportunities at the top of the funnel. This is because typically, two-thirds of your opportunities won’t convert into paying customers.
- In the middle of the funnel, you should have at least two times your target revenue forecasted to close in the next 30 days (if you’re measuring monthly) or 60 days to close (if you’re measuring quarterly).
If at any time you’re not meeting one of these minimums, a month or quarter down the road, you won’t meet your revenue goals. Based on these metrics, it will be obvious what you need to do to course correct depending on where you’re stuck.
Leading Indicator 3: Revenue Closed
Although this is classically a lagging indicator that shows what you’ve done, it can also be a leading indicator of what your team is capable of doing. It helps you understand your conversion rate and forecast the results you can get if you continue to do what you’re doing. Thus, it’s another opportunity to gain some insight to inform course correction to achieve the targets you want.
When you’re at the top of a sales peak, your valleys can be anticipated by looking at these leading indicators. The pitfall for most business leaders is to be happy when things are going well and then focus their attention elsewhere. Instead, you should be asking what will happen to sales in 30, 60, and 90 days based on your assessment of these indicators.
There’s a lot to think about when it comes to applying these high-level tips to your business, and far more detail than can be covered in a blog. I’m always happy to have a conversation about how this applies to you, so please contact me for more information.