Sales Leaders need to have their finger on the pulse at all times. They must know whether the team is on track, or not, to hit the yearly goal.
Top performing Sales Leaders are always on top of this. They are constantly making decisions to put their team in place to make the number.
Average Sales Leaders, are not.
How do those top performing Sales Leaders do it? The answer, perhaps surprisingly, is they use data.
Top Sales Leaders are relentless about using data to make decisions. They balance their experience with a data-driven point of view. They know this is the fastest way to growth.
Average Sales Leaders, on the other hand, trust gut and instinct.
But with so many metrics to choose from, Sales Leaders must be selective about what’s important and what’s noise. With that, here are 5 of the most critical metrics a Sales Leader can focus on.
Top 5 Metrics for Sales Leaders
Metric #1 – Customer Acquisition Cost (CAC)
The first metric is Customer Acquisition Cost, commonly referred to as CAC. This represents how much it costs to acquire a new customer. This is used by executives to ensure new customers are being acquired profitably. It’s also a key metric for boards and investors when evaluating the health of a business. Ultimately, when the CAC is too high, Sales Leaders explore more efficient ways of acquiring new customers. An example of this may be moving from direct field sellers to inside sales reps.
Metric #2 – Customer Lifetime Value (LTV)
The second metric is Customer Lifetime Value, commonly referred to as LTV. This represents how much a customer spends over the course of their “lifetime”. This is used by executives to understand how much a customer can generate for a business. It is also often looked at in conjunction with Customer Acquisition Cost. Organizations want to have customer LTV be at least 3x what it costs to acquire them. Sales initiatives undertaken are often tied to improving the average LTV of the client base.
Metric #3 – Selling Time
The third metric is Selling Time. Selling Time is an indication of how often your sales team is in front of customers and prospects. Benchmark selling time is ~65% and varies by industry, product and role type. Top performing Sales Leaders are hyper-focused getting, and keeping, their sales team in front of customers. They know that being in front of customers translates to growth. An example of how this is done is redesigning sales territories.
Metric #4 – Revenue per Head
The fourth metric is Revenue per Head. Sales Leaders use Revenue per Head as a barometer for how effective their sales team is operating. Typically Sales Leaders want a revenue per head that is roughly 7-10x what it costs per rep. This balances the revenue and cost side of the equation.
Metric #5 – Pipeline-to-Quota Ratio
The last metric is Pipeline-to-Quota ratio. This compares the total pipeline against the quota. As a benchmark, pipeline should be approximately 4x the quota target at all times. Sales Leaders use pipeline-to-quota ratio to ensure their team has enough ‘at bats’ to make the number. It is also a metric used to hold Marketing accountable for providing 30% of the pipeline.
Tying it all together
As a Sales Leader, the next question you should be asking yourself is “how am I performing on these metrics?”. If you are interested in finding out, download our Sales Leader Metric Calculator. This tool has been specifically crafted for Sales Leaders. It baselines current performance on each of the 5 metrics and recommends ways to improve them.
Top performing Sales Leaders are relentless about using data to make strategic decisions. Fast follow your peers. Baseline these 5 metrics and begin driving improvements against them today.
To leverage SBI’s comprehensive guide of emerging best practices for A-Player sales leaders, leverage SBI’s How to Make Your Number in 2018 PDF Workbook and turn to the Sales Strategy section on pages 342 – 419.