Getting the most out of your sales teams, with efficient Management for the highest performance. In this article, we will show you some of the most important details in managing a sales team to maximize results.
What is Sales Performance Management?
Sales Performance Management (SPM) is the systematic approach to defining and optimizing the sales processes within a business. The goal is to improve efficiency and effectiveness, as well as make better use of personal and timely resources. SPM establishes responsibility, clearly stated goals, and defines steps and processes for employees to follow so they can perform better and sell more.
During this transformation, we can also look for the potential to integrate digital technology or automation into our team. Correctly applied, this makes the entire sales process more plannable and predictable. Data plays a crucial role in the optimization as Sales Performance Management should base its decisions on real-world numbers instead of hypothesis or experience. SPM thereby allows an organization a better analysis of the current performance of a sales team and makes it easy for employees and managers to track progress with real-time results. Sales reps know better where they stand and have a better overview of their tasks, leads, customers, etc.
Management can track numbers better, test new ideas, and improve performance.
SPM has therefore become an important tool for improving the overall revenue and output of any organization. It helps to analyze and actualize the business’s progress and lays the groundwork for future growth. Better decisions can be made through the generated data and the sales process can become more agile.
Done right, it can create more revenue with less effort. A wide range of software solutions exist to help with Sales Performance Management, also known as SPM Software. But be careful: after the software is in place and implemented, it will be very hard to switch providers and use a different system. Deciding on the right software is thus crucial for digitizing and transforming the process so make sure you first make an in-depth analysis of all the different vendors and how they can fit your business
However, optimizing SPM is also possible without the need to buy expensive software. In this article, we will focus on improving sales performance without the need for expensive software.
Sales is a numbers game.
Your numbers determine the success you will have in sales.
The question is what numbers should you track, how should you track them, and also to understand why you should track those numbers.
What gets measured in your sales team, will be improved. What gets measured, will be focused on. Having a clear insight into the sales numbers is one of the best management methods to improve overall business performance and get a grip on the daily activities of your sales team. This article will explain to you in detail what the most important numbers are for you to track as a sales manager or business owner. Bundled with digitization and automation, we get what is known as Sales Performance Management.
As the numbers often vary greatly from one business to another, we will focus here on the most “evergreen” tactics and strategies for your sales metrics and give examples of what the right performance can bring to your bottom line. These are the numbers that have to be tracked if you want a high-performance sales team, no matter your industry, product, or service.
If you get those numbers to improve, your sales will improve as well.
Defining your sales process
The first step for better sales performance is to have a clear definition of your entire sales process. A process means that you start at point A and then end at point B. Point A being the customer first gets aware of your business, and point B being the same customer signs an order with your business.
What happens between point A and point B is your sales process. The characteristic of any process is that it is repeatable. This means by doing the same thing again and again, you bring a paying customer into your business. You turn a stranger into a customer, and you can do it over and over again. This is the essence of what your sales process must consist of. Depending on your industry, product, and way of running the business, the process will differ from one company to another.
For defining the process we have to take the entire sales environment into account. This includes the people working in the process, our market situation, our products and USPs as an organization, our customers, the current processes or technology we use, and so forth.
How to define a sales process
To begin with our definition we first have to look at how we currently sell our products. Even if we have not yet seen it that way, as long as products get sold in our business we already have a sales process. Gather your sales team and put together the best practices in your business, for example:
How many steps or phases are in the process?
Where do we predictably get leads from?
How are leads integrated into the process?
How do we reach out to potential customers?
Who is involved? Who needs to be or should be involved?
How do we present our products?
What is said on the phone?
Are there numerous people handling the same request or is it always one fixed person for each client?
Do we have quotas? If yes, how are they defined?
Do we work with territories?
Is Marketing part of the process? If yes, how and to what extent?
Are we using incentives?
How are our salespeople being compensated?
etc.
A critical decision to make is whether to integrate marketing activities as well as generating leads into this process or not. At the beginning of every sales pipeline, attention to your product or service first has to be generated in the market. This will always be the first step to making a sale no matter what the rest of the process will look like.
In many businesses, this task is expected to be fulfilled by the marketing department. But especially in large organizations, marketing often does a poor job at generating a steady stream of leads.
The quality and quantity of the leads directly affect the performance of the sales team. I would therefore urge you to integrate Lead Generation into the sales process every time or at least involve the marketing team in the transformation to a better sales performance.
There are some industries in which sales teams don't have to care about the awareness being generated because they are purely cold-calling, contacting already established lists of leads, or have otherwise a source for their pipeline they don’t have to fill up directly. There are also some businesses that don’t even have to do customer acquisition because their products have a demand that is high enough to keep the business afloat.
In such a case, the process starts with proactively contacting the customer. But these are a lucky few organizations. For the majority, the sales process has to start with Lead generation.
If you actively have to generate leads, you should integrate this task into the sales process and your SPM. Thereby you make sure that the entire process is covered and that responsibility for the leads is within your team, instead of blaming marketing for bad leads when things go wrong.
By integrating the bigger picture, you also get your whole team to understand what the entire process looks like and how they as individuals can contribute to it. A business first has to generate attention for its products somehow. Only when we have the attention of a person can we begin to sell them something. Without this first step properly executed, the entire sales pipeline afterward will come to a halt.
After you have defined the sales process and ensured it is outlined, documented, understandable, and can be used repeatedly, you can then proceed to define the metrics to improve your sales performance. These will be the numbers that will help you measure, predict, and optimize the performance of your team.
Sales Performance Metrics
After having a clear picture of our business’s sales numbers and their impact on the bottom line, it is time to start improving the numbers and activities in your sales process. These are the numbers that will give you an instant idea of how effectively your sales team is working. Performance metrics do not track the overall monetary side of your business but measure how effectively your team is working. If these metrics are going up, it means that you will have an overall better performance for your sales team. The better these numbers, the better usually also the output of your team’s efforts.
Taken together, these activities lay the groundwork for improving revenue and your sales business metrics. If you observe them closely, you can also clearly see how one activity in the sales process has to follow the other and how one thing in the pipeline will lead to the next. Here are some examples of metrics to measure your sales performance:
Leads Generated
Every pipeline starts with the new people who are coming in and are interested in hearing more about your product. These are our leads or potential customers. The more of these people you can generate through marketing and other ways to generate buzz about your products, the better. More contacts on a repeatable basis allow the sales team to test ideas and improve the process. And of course, the more people we can talk to, the more products will we ultimately sell.
It is therefore the most important sales metric because everything that follows in your process will start with your leads. Because it is so important we have highlighted this process in detail in our article on how to generate leads.
Calls Made
While obvious, it is still one of the most important sales metrics.
The leads we generate have to be contacted somehow. The phone is still one of the best ways to interact with people, especially when these people are further away. Calls made lead to appointments, and appointments lead to acquiring new customers. The more leads a sales rep calls on, the more sales should be generated in the end. If a sales team doesn’t make lots of calls and is engaging people actively in conversation, your sales performance will soon be in trouble.
Calls made within your team can be tracked easily per day, per week, or per month. Ratios will appear out of these numbers and can further be used to give estimates about the expected sales results. Calls made are one of the first numbers in our pipeline that should give us some prediction of the deals closed at the end of each month, as it is already in the middle of the sales cycle. Having an eye on this number will therefore help to make the sales process more plannable.
Appointments scheduled
Calls made usually lead to appointments with the customer. Especially if your products require personal contact, a live presentation has to be made or you want to emphasize building rapport with clients, this metric will be very important. In such cases your sales reps will have to make conversations with the customer sooner or later, and the more of them the better.
Again a higher number of appointments will usually lead to more quotes and offers being sent out, and they in turn will increase your chances for sales and increased revenue.
Be aware that it is one thing to schedule appointments and another thing to actually have that appointment with a prospect. Expect a certain number of scheduled appointments to be postponed or forgotten, and set up procedures to follow up with clients when this happens.
Often life gets in the way and appointments will be canceled or postponed - we have all seen and done that.
Thus make sure that the number you track will always provide a steady stream of conversations being made about your products, despite 20-30% of them being postponed or canceled.
Quotes sent out
Another important number to track is how many quotes or offers are being sent out from your team on a daily basis. A higher number will increase your chances of being chosen as the right supplier or partner and this leads to higher sales ultimately. This number tells you how strong your team is penetrating the market and allows you to estimate the revenue that will be generated for each month or quarter.
Quotes sent out will be the aftermath of calls being made and appointments being scheduled. This number is already closer to the final sales and can thus be used as a great indicator to predict revenue numbers. While it is one thing to send out many offers, it is another to structure them properly and make them attractive to the customer. You can learn more about making an offer attractive in our article on How To Create an Irresistible Offer.
Follow-Up rate
What happens in your business after a customer has bought?
Do they ever hear from you again? If they hear from you, what do they hear?
How are they being contacted and what message do you send out?
Following up is the easiest and most cost-efficient way to prevent complaints later on.
It doesn’t have to be rocket science, a simple call to ask if everything is working alright and they are satisfied with the product will be enough in most cases to make sure the relationship with the customer is on good terms.
If something goes wrong, you now have the chance to offer a solution and proactively make things right. In this phase, the customer might even be happy to hear from you. You should not wait until someone is angry enough to complain. Done right, follow-up increases the chances of up-sells, and cross-sells can thus also improve the Customer Lifetime Value (CLTV). If customer service is important to your business and you want to have good relationships with your customers, make sure to track this number carefully.
Sales Business Metrics
While the details may vary for each business individually, there are some numbers that every business will have to track in order to ensure an efficient sales performance. These numbers give you an idea of the company-wide performance and the overall record of all the activities you have set combined. They will help you to guide the business better and keep an eye on the sales side of the company as a whole. If you can improve your sales performance, it should show up in these numbers over time. Here are some examples of metrics that measure your overall sales success:
Revenue:
One of the most important and most obvious numbers is the total revenue generated by your sales team.
However, this number also includes sales that might not have been a direct effort of your sales reps. All sales generated through word of mouth, or other fortunate circumstances will also be counted under this number, even though they are not a direct result of your sales team’s efforts. This metric gives you an idea about the performance of the business as a whole. Increasing it usually means you are well on track. If it declines, you have to watch out.
Customer Lifetime Value (CLTV):
This is the number a customer spends with your business throughout the entire relationship you have with them.
Meaning not only the sole purchase of a product is measured, but also every add-on, extra service, and other money spent with your business. The Lifetime Value in some industries can stretch over years and is the combined sum of all the purchases during this time. Up-selling or Cross-Selling opportunities can increase your CLTV and thereby the profit generated by every single customer. The more a customer is worth to your business, the more can you spend to acquire them. In online advertising especially, the company that can spend the most to acquire new customers will usually win. This makes this metric very important for every organization that uses digital marketing.
Length of your Sales Cycle
When your sales process is clearly defined, you should get an idea of how long it takes to go from the first interaction with a prospect to ultimately making that person a paying customer.
This should also include the structure of your sales cycle.
For example, some products can be sold in an instant like sunglasses. Others, like industrial products or government services might take years before a sale is made. Consider the length of your sales cycle and set expectations realistically when you start improving your process. Higher-priced items tend to have longer sales cycles and less volume, while cheaper products with shorter sales cycles are usually sold in larger amounts.
For example, it might take 2 appointments on average to close a deal with an average time of 6 months. If it takes usually 6 months to close a deal, is there a way to do it in 5 months?
Or what if you had to do it in 3 months?
Find out the best practices that will most likely lead to success in your business and try to find ways to shorten the cycle, if possible. Which steps in the process are critical and which are nice to have? Overall the shorter the sales cycle, the faster your reps can deal with other prospects and thereby increase the number of customers coming into your business. This also increases the number of prospects in your sales pipeline at any given moment and allows you to make better use of your sales rep’s time and effort.
Value per customer
This metric defines how much a customer spends with your business on average. The size of your deals or the price tag of your products will usually matter a lot to your bottom line and largely influence this number. And not only the size, but also the contribution margin a.k.a. the sum that is left in your business after deducting all costs associated with the sale.
Are you bringing in clients that leave a margin of 200$ on their orders?
Or do you have customers who leave a 50,000 $ margin on their orders because they order more quantity, order faster, and more often?
How about customers who bring you margins of 300,000 $ and more, would it be nice to have more of them?
In every industry, there are some premium clients that can and will have a noticeable difference on your business, while there are also others who will hardly leave any money on the table but a lot of complaints and demand all extra services for free instead.
What do these premium customers have in common?
Where can you find similar customers?
By focusing your sales efforts on the bigger and better clients in your market you can have a lasting impact on your business, which makes this number very important to track. The more value we can create per customer, the fewer customers we need to hit our revenue goals or improve our performance.
Getting your Sales Team focused
Once you have an overview of the most important metrics in your sales process, it is time to make sure your team knows exactly what they have to do on a daily basis. Focusing on the most important tasks and having activities tied to the most important metrics is where the rubber meets the road and where a team can really bring outstanding results.
To achieve a better sales performance with our team we will have to make sure that everybody on the sales team understands the sales process (looking back at our Sales Pipeline), and knows what their daily key objectives are. Getting the team aligned and working in one direction with clear goals and daily tasks and activities to achieve them will be the starting point of better sales results.
Depending on the ratios you are using in your company, a sales rep can thereby always know if he or she is on track to hit the demanded quota at the end of the month or not.
This allows for a daily overview and guidance in case something does not turn out as planned, for the individual employee as well as for the management.
For example:
If a salesperson is supposed to make 10 calls a day, and that same person only makes 3 calls, then there are 7 calls missing at the end of the day. Now if this happens one day of the month, it won't be that much of an issue. Maybe nobody would even notice.
But the problem is in sales it is very easy to let things slide. Hey, after all, I feel a little tired today. I'm just not in the mood, the weather is bad. The week has just started, and people sure will be minding their own business. The weekend is almost here.
People surely have better things to do so why bother calling them anyway?
It is common to think like that. And from a human perspective - it is totally understandable. We all like to take the easy way out. And we certainly look very productive in that office building all day, coming in early and going home late.
The problem is, if 10 calls are due and you only made 3 calls that day, guess what that will mean for your quota?
It happens pretty fast that out of one such day, there are suddenly many of these days.
And from these days evolve weeks of such performance. And weeks become entire months of bad performance.
At the end of the month, there are often creative explanations on why the numbers do not look as they should: The customers just didn't pick up, nobody was responding, appointments were scheduled but then canceled at the last moment, and so on.
The only truth is: your team didn't fill up their pipeline.
It will be your responsibility as the sales manager to set up systems and procedures that will guarantee that everybody is held accountable for their result in a productive way. Activities have to be measured and controlled within the team to make sure there is no way of letting things slide. With the right metrics in place, we can have a clear picture of who is on track and who is not. This also gives us more accountability within our team.
Software solutions like CRM systems can make all these numbers easily visible and simple to understand for everyone what their current most important objectives are.
Generating ROI from your Sales Reps
Contrary to what many business owners believe, a sales team doesn’t have to be a business expense. In fact, salespeople can be the best investment a business can make. With the right structure and management, each employee on your team can become an asset that brings cash into your bank account every month. Especially if the customer lifetime value of your customers is large or you are selling high-priced products, a sales team pays for itself easily.
Simple products can be sold through Webshopa, but industrial equipment or other complex material has to be sold from person to person.
The more margin you have on your product, the better can your sales team generate a direct ROI from their jobs for you.
For example:
Let's say an order will be worth an average of 80,000 $ to you, leaving 20,000 $ in profit margin and you have a sales team of 5 people.
Those 5 people are supposed to make 10 calls a day.
This equals 50 calls per week per sales rep.
That makes 200 calls in the whole month per rep and 1,000 calls for your whole team per month.
If we use the very conservative ratio that only 1 out of 100 people buys your product (which is a really bad ratio by the way) then from those 1000 calls a month, your team should bring in at least 10 orders. 10 orders would mean 800.000$ revenue coming into your business from your sales staff, per month with 200.000$ in profit per month. Deduct the monthly salary of 5k for each sales rep and you still have 175.000 $ left in pure profit per month..
Not bad for a start and for those conservative numbers.
800,000$ per month would mean 9,6 million per year in revenue and 2,4 million in profit, generated solely by the new acquisition of your sales team of 5 people.
That makes revenue per rep of 1.920.000$ for the year, with a constant and disciplined activity.
Ultimately this means your business will earn 480.000$ per rep in profit from that activity!
That does more than just compensate for the salary, healthcare, and other business expenses, and still leaves lots of profit in your business!
With a high-ticket product to sell and a small team of just 5 sales reps that are working disciplined and focused on their daily tasks, this is an incredible cash machine any business owner can make use of. A high-performing sales team can thus be one of the best investments a company can make.
But remember: it is our job as managers to provide a finely tuned sales process, pipeline, and lead generating so our sales reps can achieve such a performance.
High Sales Performance Vs. Low Sales Performance
But what would happen to your prosperous business if only 2 of your salespeople on that team decide to take it easy, relax, and goof off a little bit and only make 3 calls per day instead of 10? The difference in the numbers is actually shocking.
Small, minor details in your sales performance will make a giant difference.
According to one study in Sales and Marketing Magazine, only 16% of all salespeople come within 90% of hitting their quota. The vast majority of salespeople thus underperform.
Having only two of five team members underperform in our example doesn’t sound too bad - after all, you still have 3 reps performing at full blast. Let’s look at the numbers of the 2 low-performers: 3 calls a day makes only 15 calls per week (instead of 50 for each rep). This adds up to only 60 calls the entire month instead of making 200 calls, as they would be supposed to do.
Staying with our previous ratio, where one out of 100 people buys, the chances of making one sale in a month is now 60:40. Meaning on average, you will not even make one sale per month for these reps.
Results now become a lottery whether they have an order at the end of the month or not. Luck gets involved if these two sales reps will make a sale at all. Predictable revenue numbers are out of the picture. To make matters worse, as soon as other team members see that “taking it easy” is tolerated, they might be reducing their output as well. If you put a rotten apple in a basket with fresh apples, the others will also start rotting.
The revenue expectation from these two reps shrinks to only 7,2 orders per year, equalling 576.000$ in annual revenue instead of 1.920.000$ for a high performer.
The revenue from your team shrinks to 6.912.000$ for the year instead of 9.6 million $ annually if everyone was meeting their quota.
The goofing off taking it easy from these two employees just costs you 2.688.000$ in lost revenue per year! Please stop here for a moment to really grasp those numbers. Note that these people didn't do anything specifically bad, they were just taking it a little easier than they should. A few calls less per day, every day. They might still be nice people and have good intentions, only their performance drops more than it should.
The result: millions in revenue are lost!
As you can see, even minor deductions from quotas and goals can make a massive difference in sales performance. Not making enough calls per day seems like a minor mistake and something common to do. After all, we all have bad days. Common, that one day won't matter. That saying goes on the next day, the next week, and the next month. Those days make up weeks. The weeks make up months.
The months make up a year.
In sales, those daily contacts are the lifeblood of the job. Nothing in a business ever happens until a sale is made. Talking to new people on a daily basis is the main reason why anybody should show up at work in this profession. If there are no calls being made on a day or otherwise interactions happened with customers, then that salesperson has not worked that day - even if they spent 10 hours in the office.
It is very easy to mistake being busy for being productive in this job.
Reading emails, doing any sort of paperwork, or creating presentations is not a productive part of a sales job, it will only take up time without bringing any additional sales.
Without sales calls and appointments, the day is lost entirely for a sales rep.
If you tolerate only having one unproductive person on your team, it will very easily spread across the other team members. Ultimately this might cost you millions in lost revenue.
Therefore it is more necessary in sales than in any other part of the business to call the shots, provide your people with great material and a steady lead generation, and also demand to do the things that are expected. Discipline and daily determination are essential for success in selling, no matter your product or industry.
Your revenue numbers will thank you for it - and even your salespeople when they receive a big commission check at the end of every month.
Better Sales Performance = Better Business Performance
Now let's look at the opposite: what would happen if your salespeople in the same team of 5 actually performed better than expected?
Let's assume that you again set the task to make 10 calls a day, but your salespeople are committed and decide to make 12 per day. Just two more calls, which is a work amount of maybe 20 minutes if you really have long conversations.
Regardless of the additional work effort put into it, what would those additional 2 calls of your team of 5 salespeople bring into the business at the end of the month?
With 20 working days a month and 12 calls per day, the salesperson would make 60 calls per day instead of 50.
And 240 calls per month instead of the scheduled 200.
If your salesforce then consists of 5 people as in our previous example, that would make an additional 80 calls from the entire salesforce per month.
That makes 960 additional calls per year.
With the bad average of one out of 100 contacted people becoming a customer - you would make 9 additional sales per year, making an extra 720.000$ per year
Just two more calls per day from two out of 5 sales reps can bring your business 720,000 $ in additional revenue!
Talking about growing your business! If you get the chance to get all 5 of your reps performing at that level, you can already assume what this would mean to our numbers.
As you can see, the opposite effect is also true: if there is only the slightest over-performance in your sales efforts, your company can reap big rewards from it.
Just as only minor under-performance can lead to catastrophic results.
Thus as a sales manager, your job is one of the most important that exists in any business. There is hardly any other role in a business that can have such a direct effect on the bottom line.
When hiring for top sales talent, you have to look for people who are really committed to the cause, and who understand what affects their performance. The process has to be clear, reliable, and scalable. Steady and repeatable Lead generation has to be a top priority in the business to give your sales team the chance to operate with full effort.
Salespeople and sales managers are your most important employees in any business.
Their daily activities will determine how much cash will be in your pockets at the end of the month. And they are the only role in your organization that will allow you to create a direct
As you can just witness from those numbers, if you can get a little extra performance out of everybody on your team, the results for you and the business can be huge.
But even with extraordinary results, there is nothing unique about it that people either have or do not have. You don't need “superstars” to reap extraordinary performance.
Everybody can develop discipline. Everybody can learn to communicate with people.
Everybody can learn to make calls, and appointments, and offer solutions in the form of products.
What you will need, however, is people really willing to fulfill the job and what is asked from them instead of simply someone who wants to have their bills paid and leave at 5 pm.
This willingness to go the extra mile is what you have to look for in hiring salespeople.
And these people will need and demand superb leadership from their sales management.
With the right tools and the right environment, your sales team can become the biggest asset your company possesses.