I hesitated writing this, I’m calling out a colleague who I think is providing very well intended, but misleading advice. This individual is genuinely trying to be helpful, he’s trying to simplify something that tends to get very cloudy and confusing.
In sales we are deluged with all sorts of metric, most of which are meaningless, many of which are contradictory. Too often, these metrics divert a lot of sales time and way too much management time trying to understand and track.
In the end, most often, they aren’t helpful in answering the fundamental question all sales people must answer:
Am I doing enough of the right things, with the right people, at the right time to make my goals?
Like my colleague suggests, we actually don’t need a whole lot of metrics to be able to answer those questions. For example, tracking dials, conversations, and so forth is not very meaningful. If they are creating a sufficient number of new opportunities, one might surmise we are doing the right number and quality of activities to produce that result.
So the goal is to simplify our metrics to the few most critical to enable us to answer that question. The problem is, this is still complex and sometimes, we oversimplify and in that process lose the ability to answer that fundamental question
Unfortunately, my colleague has done just that. My issue is not so much with him, but to show this if very difficult and even some of the most experienced get it wrong. We all need to really understand what we are doing, what we are measuring, making sure it’s enough to answer that question and not more.
Let me use his suggestions as an example. My colleague suggests the 3 most important metrics in sales are:
- Number of New Opportunities Generated.
- Average Transaction Value of Deal Size
- Win Rate
Let’s look at some imaginary numbers. Say I create 5 new qualified opportunities a month. My average deal is $500K and my win rate is 50%.
The question is: Is that enough for me to make my numbers?
It’s impossible to make any assessment of that. One might make some guesses that I’m going to close 2.5 of those opportunities I create every month, driving $1.25 M in revenue—sometime.
But these metrics are insufficient to answer the question, “Will Dave make his quota?”
For example, if my quota is $10M and my sales cycles is 12-18 month, none of those new opportunities will hit this year. I’ll have to work them so they hit next year. See, we have to know more. In addition to the quota and sales cycle, we have to understand our pipeline dynamics, specifically the volume. For me to have a “healthy pipeline,” based on the data above, I have to have about 20 opportunities that are targeted for closing this year. (And I started working them last year.)
Or maybe my sales cycle is 6 months. The new opportunities I develop in the first half of the year should hit, and I should get $7.5M from those. I’m still $2.5M short–but if I had other opportunities in my pipeline, I might be able to make my number, but those 3 metrics don’t give me enough information.
Without a doubt, those 3 metrics are among the most critical for us to know. But by themselves, they are meaningless. We don’t know whether those numbers are good or bad. We aren’t tracking enough to answer the question, “Will Dave make his numbers this month, this quarter, this year?” And my job is to make those numbers.
I think my colleague’s intention is to make a point that we make sales performance metrics far more complicated than they need to be. As I start looking at the dashboards of many of my clients, particularly those of SaaS companies, I can’t figure out what’s most important and what people need to do to achieve their numbers.
I’m in complete agreement with my colleague’s intent. We need to track the Minimum Viable Metrics — and no more. But we have to get it right. The way to test this is, “Do they enable us to answer the question, are we doing enough of the right things with the right people at the right time to achieve our goals.”
