subject: Metrics And Sales Performance [print this page] The makeup of your deals cycle and the explicit metrics that you use for your deals funnel will ultimately reveal the rate at which your deals will grow. Determining which key performance indicators to use and the amount of time between measurements will have a considerable impact on the data collected and the resulting tactics.
Regardless of the KPI's that you decide to use, the performance of your deals cycle should be periodically measured against a benchmark and monitored for change. Through the simple act of measuring customer interaction, touches, and how the customer interacts with your company through the deals process, the efficiency of a deals channel can be identified and thus improved.
Among the unique deals channel metrics that are to be used to reveal the performance of the channel, channel value is an significant one. It refers to the potential value of the entire deal in a channel and in fact it also represents the value of future sales. Because it includes future values, the channel value allows you to evaluate the long-term profit potential of a deals prospect or client.
When measuring the performance of a deals cycle, it would be ideal if every facet of the funnel were tracked; in truth, sometimes it is not possible to assign each and every value. Often, to streamline the analysis, each deal in a sales funnel is evaluated individually. Score cards or ratings for each aspect of the deal can then be monitored and weighted based upon the probability that the deal will go through. To get the correct channel value and in case of doubt, then the deals that are placed at the start of your sales conduit must be given a lighter weight as compared to those deals that are close to being completed.
Other metrics that are measured in sales funnels are arrival rates, conversion rates and flow rates.. The arrival rate refers to the total deals that are in the channel during a particular period of time. Such a rate can be quantified in terms of its potential value as well as plain numbers. Generally the arrival rate is useful both for forecasting revenues, but also determining cash requirements to fund sales and operations activities.
The conversion rate is another metric often associated with the sales funnel. This rate reflects a particular ratio of deals entering the conduit and which have been concluded. This rate is useful to reveal the effectiveness of qualifying steps and placing a value on lead acquisition. Perfect (hundred percent) conversion rates show that all deals that were qualified had been changed into real sales. This is of course an ideal situation but is mostly unachievable in real life.
Another key metric is the flow rate. This funnel metric is defined as the amount of time a typical deal remains in the sales funnel metrics. Generally the flow rate is not a precise number, but instead has a minimum or maximum for a given deals opportunity. Like the other metrics, benchmarks for flow rates in a given industry may be available.
Unfortunately, industry benchmarks do not address the delays that often happen as large projects move through the deals funnel. When determining the flow rate for your explicit sales cycle, outliers should be taken out of the data to get a better picture of the metrics for an average deal.
