Are You Paying Attention to the Right Sales Metrics?

When I discuss sales organization metrics with CEOs, two things regularly come up. First, I’m surprised at how narrow the metrics are that they are measuring. Second, CEOs are surprised at how little they actually know about what’s happening in their revenue pipeline.

Sales metrics reported to CEOs are typically limited to a revenue forecast for the current quarter, a forecast a little further out on the time horizon, and then a general sense for an annual number. Unfortunately, these revenue forecasts are often composed of a series of modified guesses, adjusted at each level in the business in an attempt to make the forecast just positive enough to be acceptable to the next level of management. Needless to say, this dysfunctional dynamic rarely produces a forecast with good data on the overall health of the revenue stream for the business.

When it comes to sales metrics, a tremendous amount of time is spent reviewing information that leaders can do very little to influence. Daniel L. Stufflebeam, a founding father in the field of evaluation, believed “Measure to improve, not to prove.” We “prove” by reviewing the business measures that matter most, including revenue, net income, and other key performance indicators. But other metrics are needed to drive improvement. For CEOs to influence outcomes and drive growth, they need to look at indicators within the sales organization that ultimately produce results. Here are a few leading indicators that can be applied to any business:

1. Number of qualified opportunities entering the pipeline.

If sales is the execution of your strategy, then opportunities to sell to your ideal client profile are a major factor in executing your strategy effectively. Your ideal client profile takes into consideration the company type and industry, but also the level of the contact and whether they have buying authority. The issue of a contact’s position within the company is often overlooked by marketing departments as they publicize the leads they send to sales, but the position of the contact is as critical as the company type. If your ideal client is a major financial institution, then a contact from Bank of America may seem amazing. But if that contact does not have authority to allocate money to what you are selling, then it’s not really much of an opportunity, unless your team leverages that connection to get to a bona fide decision maker.

2. Stage advances.

Most sales processes, even the generic ones that come loaded in CRMs, consist of five to seven stages. If they are well designed, each stage carries with it discreet actions for working with customers. Completion of those actions necessarily moves you to the next stage in the process.

It’s valuable to understand the velocity of movement from stage to stage as an indicator of overall revenue stream health. You might look at the number of opportunities moving from Stage 2 (often called “identifying needs”) to Stage 3, which may be called “presenting solutions.” Or the total dollar value of opportunities moving from stage 3 to stage 4, “negotiating terms.” “We moved 4 million dollars from stage 3 to 4” can be especially relevant to outcomes, if typically getting to stage 4 has a high likelihood of success.

3. Stage values.

A $100 million pipeline may be great. And it may be weak. At the aggregate level, the gross value of the pipeline isn’t always the most reliable indicator. Not all stages in the pipeline are created equal. An opportunity worth $1 million in stage 1 is worth far less than a $500,000 opportunity in stage 5, which could be close to closing. Understanding the true value of opportunities at each stage helps leaders focus on the right parts of the pipeline and allocate resources effectively.

Executives are often myopically focused on the late stages of the pipeline, but that’s a major oversight and the cause of many a stalled or failed deal. It’s during the early stages that their influence can have the greatest impact. C-suite leaders can promote decision-maker relationships and access for their sales team early in the process. Executives are excellent at helping clients recognize potential needs and broaden the scope of solutions. When leaders get involved later in the game, the problems to be solved and the solutions are already in place and you are just negotiating the price. The real value of any deal is shaped and can be changed only in the early stages of the pipeline.

4. Specific milestones of progress for your business. 

Each business has a few key measures that can be especially meaningful. An investment firm I worked with found that they had a 90% close rate when clients did a site visit during stage 4, compared to a less than 50% rate of closing when they didn’t. This didn’t apply when the site visit occurred earlier in the process, when it wasn’t as useful. For this firm, having the chance to display their impressive tech setup at the right time was a differentiator in the competitive world of quantitative investing. Once they identified this effect, they didn’t simply schedule more site visits. Instead, they became very focused on the visit as a key measure of progress in their stage 4, which was just before closing.

Executives are responsible for the future value of any business. So, having a useful dashboard of leading indicators that are predictive of the overall health of the revenue stream is a valuable asset. Rather than “measuring to prove” with the typical data found in forecasts, take a rigorous, in-depth look at what could be improved within your sales process. There are likely specific measures of progress that are particularly meaningful to your business, where a healthy revenue stream can be shored up with the right interventions at the right time.