Business is tough. Your competition is actively trying to bury you, customers are slow to pay you, and the government will abscond with a pile of your cash if you have the audacity to show a profit. At times it can seem as if the deck is stacked against you. If those factors weren’t bad enough, here’s another nugget of inspiration for you,
“You’re probably digging the hole, jumping in, and burying yourself.”
The good news is when you stop digging, your competition will become less relevant, and your customers will fuel your growth instead of consuming your cash flow.
The key to getting out of your hole could be as simple as examining your data.
For example, you may be tempted to over-value the total revenue of a sale. If this is the case ask
“Would you rather close 100 deals for $1000, or one deal for $100,000.”
Is a larger deal inherently better than a smaller deal? The revenue is equal, but the impacts to your business could swing dramatically, depending on the nature of your business. You need to dig into the numbers to identify the truth.
Sales Metrics Explored
For many businesses, the 1st (and often last) metric used to measure the health of a company is sales:
This question, though, is a very poor question from which to establish any actionable intelligence. Exactly what numbers are you expecting sales reps to hit? Does the number (or numbers) you put the most emphasis on really tell you anything about the quality of the sale or the sales rep?
Margin, Markup, and Profit
For example, is it easy to sell a particular product or service; perhaps too easy?
Easy sales are great…if the margin is acceptable to you. If reps focus on easy-selling, low margin products or services, you may find yourself in a perpetual state of “busy-ness” without the reward of profitability.
Additionally, don’t confuse Markup with Margin. Markup is the difference between cost and sale price.
Make sure profit margin for your products and services
is in line with expectations.
Does it seem like the economy, season, or countless other variables continually turn promising months into strings of red numbers? Do down months have you doubting your team’s ability to close the deals? Here’s the secret to remember,
“You can’t make anybody buy anything they don’t want.
The only thing you can control is your activity."
Are you performing the tasks today that will lead to success tomorrow? Is your marketing effectively generating leads? Are you tracking the source of leads so that you can reach your most likely customers?
Are you A/B testing so that you can know what worked and what didn’t or are you haphazardly throwing everything against a wall to hope something sticks?
Do you have a standardized, documented, and automated process to ensure leads are followed up with promptly or do they get lost in voicemail or
Average Dollar Sale and Customer Lifetime Value
Identifying your average dollar sale will allow you to focus on the opportunities that are most likely to be beneficial to you.
We often chase opportunities that are far below or above our sweet spot in hopes of gaining a long-term relationship or landing a game-changing “big fish.” The reality is, most often, we end up barely breaking even on a small job. Sometimes, this is because we re-allocate resources from more profitable jobs to complete them or we limit our ability to accept profitable projects because of a backlog of “junk.”
Will this customer continue to expect special service or pricing? In other words, will they ever turn into an “A+” customer, or will they continue to hamper your ability to succeed with other more profitable clients? Providing your product or service should be beneficial to both parties.
Ultimately, a failure of your business to succeed will benefit
neither your customers or you.
Conversely, we increase our costs or risk (with overtime or investments) attempting to prove that we can punch above our weight class. Perhaps the work is not something we do well, but the money is “too good” to pass up. Would you want to do this project again…and again…and again? An amazing trait of data is that it gives us the courage to say “NO.”
While average dollar sale is a good measurement of comparison during prospecting and qualification phases, when combined with post-project metrics, you can identify the types of opportunities that have the greatest likelihood of benefiting your business.
Be the best version of yourself. It’s OK to stretch
if the data proves it is a growth opportunity,
but don’t overextend just because
you “hope” the payoff will be worth it.
Once you have leads in the door, are you converting? Identifying your conversion rate and average dollar sale will allow you to know how many leads you need in the pipeline to hit your revenue goal.
Are some reps converting at a higher percentage than others? Is this because they are performing any special activities or capitalizing on hidden buying queues? Perhaps their activities can be replicated across the organization, or training offered to reps with a high number of stalled proposals.
Which Metrics Are Important to You?
This seems like an obvious point, but selecting the wrong measuring stick is going to give you overly positive or negative results. Choose your metrics wisely.
If you’re interested in learning more about using your data to succeed in business, download our