Sales

Roundtable: Which Sales Metrics Matter Most for Young Companies?

September 2, 2011

Last week, our panel of experts weighed in on the top sales mistakes young companies make. In the second of this three-part series, Rich Chiarello, Jonathan Farrington, Colleen Francis, and GuruGanesh Khalsa discuss the sales metrics that early and expansion stage organizations should care about most.

Next week: What sales methodology do you recommend for young technology companies?

What are the key performance indicators or metrics for sales people at the expansion stage?

Rich Chiarello, President, Above the Line, LLC

Rich Chiarello

Assuming at least a three month sales cycle, the inside sales metrics I look for are the number of connects, connect talk time, and pipeline growth. Assuming a three-to-nine month sales cycle, the outside metrics I focus on are prospect and customer visits, average deal size, pipeline growth and referrals. For outside sales, if you have quality face-to-face meetings and can grow your average deal size, you will always succeed.

We advise our clients to build a sales onboarding model where they track the costs of a new hire against the qualified pipeline he/she creates. If the sales manager inspects the pipeline for reality, then you are safe to hire another salesperson once the qualified pipeline equals three times the ramp up cost.

Jonathan Farrington, Chairman, The JF Corporation

Jonathan Farrington

Obviously, the key metric for salespeople – internal or external – has to be sales closed. However, many companies now measure and reward gross margin generated, rather than gross revenue. Another key metric is often the number of accounts retained and developed.

My teams have quarterly business reviews (QBRs), where we review performance for the past three months and confirm primary and secondary objectives for the next three. These objectives will vary from one salesperson to the next, and be totally focused on what we – the salesperson and his or her manager – have agreed is most important.

Colleen Francis, Founder and President, Engage Selling Solution

Colleen Francis

If the company is young enough that these are the first salespeople and the first sales, they need to be measuring activity levels. For example, they should look at calls on a weekly or monthly basis — or meetings, if it’s outside sales — because they can’t necessarily measure the success of a salesperson on sales since there could be a six-to-eight month sales cycle. So early stage companies with no customers need to measure pipeline metrics – how many calls does it take to get an appointment; how many appointments does it take to get an opportunity; how many opportunities does it take to get a sale; and how long is that process?

They also need to be tracking pipeline gross, that’s an important metric. Average deal size or transaction size. Depending on the customer as well, you might measure the average number of transactions. If you have a product that requires repeat orders, that’s an important one as well. Or if you’re a Software as a Service company, you want to be tracking how long the average customer stays in your program.

I think it’s also critical to track when the cancellation months are if you’re a SaaS company so you can see where the peaks are. So if you spot a trend that says everyone’s bailing at four months, then you could implement some client retention strategies in months two and three to keep your customers three or four months longer.

GuruGanesha Khalsa, CEO, Sales Training Institute of Virginia

GuruGanesha Khalsa

Probably the biggest and most important metric you’re looking at is the margin of error in your forecast. That tends to be very high with inexperienced sales organizations. Everyone has a margin of error, but with a really disciplined, well-trained sales organization using a high-caliber system like Sandler, the margin of error in the forecast is very small. The upside being … for example, an organization that manufactures goods, if the forecasting is inaccurate, it can wreak havoc in terms of open inventory, and so on and so forth.

You [also] want to look very closely at what the length of the average selling cycle is. In other words, from the initial point of contact to when you’ve got an outcome, with an outcome being either a signed contract or a clear “No.” [Another thing] you want to look at is what the size of an average deal is … [and] what your closing ratio is in competitive situations.

Content Marketing Director

<strong>Amanda Maksymiw</strong> worked at OpenView from 2008 until 2012, where she focused on developing marketing and PR strategies for both OpenView and its portfolio companies. Today she is the Content Marketing Director at <a href="https://www.fuze.com/">Fuze</a>.