Lagging vs. Leading Indicators of Sales Success
According to Zig Ziglar, “if you aim at nothing, you’ll hit it every time.”
As a leader, you need to have a clear and transparent set of goals and objectives that others can rally around. Without it, others might be unsure of whether or not they’ve met those goals.
Also, as popularized by John Doerr, you must measure what matters. The goals, objectives and key results should cascade across the organization and must be impactful. This requires planning, communication and ongoing monitoring and evaluation.
Our Approach to Measurement
At Altus Alliance, we’ve helped over 300 companies grow their top line revenue over the last 20 years. While each of our clients require unique strategies and executional approaches based upon their industry, stage of growth, product and team, there are a set of challenges commonly expressed by our clients when they first come to us.
In partnership with Stanford University’s Graduate School of Business, Altus has developed a framework—21 High-Performance Revenue Elements—to assess and help our client’s optimize against such challenges. Chief among them is clients’ failing to develop predictable sales forecasts.
Making Accurate Sales Forecasts
Being able to better predict sales is critical to a company’s success. It allows companies to budget better, hire and retain staff, and garner investor confidence and secure additional funding. Despite its importance, many fail to accurately forecast sales for two main reasons:
- lack of clear and transparent goals for success and
- focus on lagging indicators of success.
When it comes to measuring what matters in sales, leaders often solely focus on the number of accounts won, deals closed, and/or revenue achieved. These are outcomes or lagging indicators of success vs. leading indicators.
As a result, leaders may be unable to influence the outcome, making one’s intervention or assistance become too little, too late, especially when things don’t go as planned.
Which Sales Indicators to Measure
While outcomes are important, Altus recommends measuring 8 leading indicators to improve the ability in meeting ultimate growth outcomes.
- Number of Leads Created. No matter how good your product, marketing or sales is, it’s improbable that you immediately close every sale. If you don’t fill the top of the sales funnel with qualified leads, you’re doomed for failure. Therefore, the first leading indicator of meeting one's sales target is the number of leads created.
- Number of Calls Made. While many organizations rely on an increasing number of inbound inquiries to fill the top of the sales funnel, increasing the importance of close partnership between sales and marketing, effective outbound calls are still important. By utilizing monitoring and coaching tools such as Outreach, ringDNA, and Salesloft, a leader can improve the efficacy of his/her team’s message and delivery.
- Number of Emails Sent. Based on our experience, it takes an average of 8 touches before a meaningful connection with a prospect. Varying the modality of interactions improves the effectiveness of reaching your audience. By utilizing the same tools mentioned above, a leader can measure click-through and open rates of messages to optimize content and messaging.
- Number of Social Media Interactions. According to data published earlier this year, 90% of people with access to the internet use social media. Effective social media interactions will increase and expedite interactions with customers, and ultimately grow sales.
- Number of Meetings Scheduled. It often takes several attempts through marketing messages, outbound calls and emails before a customer accepts a meeting. These meetings are an opportunity for your sales team to establish a rapport with the potential customer, discover their pain points and objectives, and facilitate success for the next sales stage, presentations/demos. Tracking the ratio between those previous steps to meetings scheduled and the reasons for success and failures in getting to meetings and successfully completing the meetings help accelerate future deal closures.
- Number of Sales Presentations/Demos. Assuming that your team has done their job in understanding the potential customer’s needs and tailoring your product/service to those needs, this leading indicator is an excellent predictor of reaching a company’s sales goal. Over time, company leaders can measure this number against its close ratio to determine whether there is an issue with its sales team understanding the pain point of its prospects, determining respective stakeholders among its prospects, and how best to pitch its value proposition.
- Number of Proposals Sent. Getting to this stage likely means that your potential customer approves of your product/service and that your sales team did a sufficient job in presenting the value of the product/service. Prior to closing the deal, all of your team’s previous efforts culminates in a tangible deliverable in the form of a proposal to the customer. An effective proposal should contain all of the details uniquely addressing the customers pain points and needs. By this point, your team should know who your champion is within the prospective customer and be ready to support him/her to take the proposal across the finish line.
- Close Ratio. All of your team’s hard work is paid off with the closing of a deal. One should measure the close ratio against each of the previous stages to determine an average length, success ratio, and diagnose issues and think of solutions to optimize the close ratio.
By developing a disciplined rigor for measuring leading indicators throughout each stage of the sales process, business leaders can expect to have a more predictable sales forecast, clarity in expectations, and earlier opportunity to coach and improve their team’s performance. Ultimately, this results in improved morale and business success.