A sales leader’s role includes assisting sellers in improving their sales performance, which is likely the most significant aspect of their job. Evaluating sales performance is an important component of the process of increasing performance. Keeping track of and reviewing key indicators will be a source of pride as well as a means to focus future training and skill improvement.
What criteria should a sales organization use to evaluate sales performance? Traditional sales measures like objective achievement or quota attainment aren’t the only factors that influence performance. They provide a high-level picture of overall performance but do not reveal how each part of a sales organization is functioning.
The Need to Measure Sales Performance
Leadership develops strategies to achieve its objectives accurately, but on what are these decisions based? The vast majority of the time, they are based on intuition. And this is a bad idea.
Leaders who make decisions based on instinct and what they assume will happen are not doing so based on facts. This means that the sales plan, estimate, etc are all based on the best assumption. Consider it in terms of earnings. What if salespeople were paid according to how much time they were expected to work? They would probably be worried that their judgments were based on a guess rather than what they deserved to be paid.
The same may be said for sales forecasting. Performance cannot meet expectations if the leader’s strategy is solely based on gut instinct. It’s a delusion. To make well-informed decisions and build accurate plans, leaders in sales organizations must strategically combine sales data with experience.
How to Evaluate Sales Performance Fully?
So, what measures does a sales organization needs to accurately evaluate sales performance? Here are four measures to track to effectively measure sales performance.
Leaders in a sales organization need to understand what percentage of sales representatives’ time is spent selling. Hence, sales productivity is critical for leadership to understand, cecause time spent selling helps quantify sales effectiveness in terms of efficiency.
Average-performing salespeople devote just around 35% of their time to direct selling and spend the other 65% on non-selling activities. Non-sales calls, internal conversations/meetings, and even networking are examples of time sinks. On the surface, all of these activities appear to be innocuous, yet they pile up.
Salespeople who spent more time on sales-related tasks enjoyed their jobs more. Indeed, there is a significant difference in work satisfaction between salespeople who spent three hours or less per day on sales-related jobs and those who spent four hours or more per day on sales-related jobs. Job satisfaction scores on an average of 3.8 out of 5 in those who spent more than four hours on sales work.
Once the sales leader finds out what’s causing the low productivity, he or she can take steps to remove the impediments and boost sales, and thus become a more strategic company with more efficient operations.
Lead Response Time
Time is valuable when it comes to how long it takes representatives to follow up on leads. The longer it takes a sales representative to respond to a lead, the worse the performance will be.
The following is a breakdown of how time affects lead conversion success:
- Representatives receive a “21x increase in qualifications” if they reach out within 5 minutes vs 30 minutes
- Representatives who perform outreach within 5 minutes are “100 times more likely to qualify the prospect.”
- If representatives call the lead within an hour of receiving it, they are 7 times more likely to qualify the lead than they were to wait for another hour.
- If representatives wait the full 24 hours, they risk losing 60% of the chances of qualifying for the lead.
Consider the resources invested in generating leads from marketing and other sources. Sales representatives must generate interest in the product or service if they want to increase sales. These leads are then used to build a sales pipeline, which is necessary for a sales organization to function and thrive.
Opportunity Win Rate
The win rate is the percentage of opportunities that result in a closed deal. If the win rate is low or declining, the next logical question is “why?” Was it taken away from by a competitor? Is the customer opting for an internal solution? Or did they decide not to look for a solution at all?
It’s not enough to know that a deal has fallen through. You’ll need to be able to track where it left the funnel. It could be a sign of poor rapport building or a lack of efficacy with demo presentations if it fell out of the funnel early. Alternatively, it could indicate that lead qualifications must be improved to ensure that the right opportunities reach the pipeline.
If losses occur later in the funnel, they may be a sign of poor negotiating abilities or an inability to close effectively. A low win rate could be due to the size difficulty, or the possibility of the transaction closing, rather than the individual representative’s talents and abilities.
While training and coaching can assist improve any skill that is lacking, keep in mind that training alone may not be sufficient in some cases. Poor-closing salespeople should be moved into different roles so that they might excel at opening doors for others who are better at completing deals.
However, sales organizations are not only attempting to identify poor performance by evaluating sales performance but they should also look for areas where people are successful and share those practices with the rest of the sales team.
Average Deal Size
A sales organization must evaluate what is the typical sale price or profit margin on closed deals. If it is noticed deals that are below average, it could mean that representatives are choosing for smaller, simpler wins, or that they are discounting normal/average offers to close the deal.
Deals coming in at a faster rate than typical may indicate that the opportunity should be evaluated. It’s critical to guarantee that salespeople are focusing their efforts on the most profitable and likely to clinch deals.
You can observe when and how much your sales objectives should be altered by tracking the average transaction size over time. This informs sales companies when it’s time to focus on lead creation and come up with new strategies to sell.
However, a shift in average deal size isn’t always a positive or negative thing. It simply implies that you must examine your previous data and pipeline to determine how to best alter the sales plan.
The Bottom Line
Continuously evaluating sales performance health allows spotting possible problems before they become too serious to fix. Sales organizations must monitor sales performance properly and efficiently to be successful.
This necessitates a smart system to measure, monitor, and analyze revenue-generating activities. As such, good sales managers become helpless bystanders forced to manage with out-of-date data due to a lack of real-time visibility.