Updated December 2021
Has someone ever told you to “stop fixating on revenue?” Chances are probably not. More times than not, the only two metrics CEOs, owners, executives, and sales leaders look at are revenue and gross profit. Unfortunately, looking at just those two numbers can cause your sales growth to become stagnant.
Revenue and gross profit are significant numbers, but stare all you like: you can’t change them. It’s like looking at the scoreboard after the game.
Instead, put some focus around leading and lagging indicators. A lagging indicator is an observable or measurable factor that changes sometime after the economic, financial, or business variable with which it is correlated changes.
A leading indicator can give you clues about success or failure before it’s too late to adjust. It’s more like calling timeouts during the game to discuss what is working or not working, then adjusting.
Take a look at the “The Big 3” of measurement. Those are the number of opportunities, your close rate, and your average deal or account size.
Revenue and gross profit are significant numbers to watch, but here are three other numbers you should be tracking.
Are we pursuing enough opportunities? This is a leading indicator and can be defined in many ways. For example, if a salesperson cannot generate enough opportunities, they will struggle to reach their goal.
Two ways you can help a salesperson increase their number of opportunities are by:
Are we converting the opportunities we find? Even if the salesperson is very active and sees many opportunities, they must have the ability to move them through the pipeline and eventually close them.
Two strategies you can use to help a salesperson increase their close rate are:
Are the opportunities big enough to hit our goals? Even if a salesperson finds enough opportunities and closes them at a decent rate, they will struggle to hit a target if all the deals or accounts are small.
Two things to keep in mind when helping your salespeople with their average deal size:
Determine what your “Big 3” will be, set goals for your salespeople around those metrics, then hold them accountable to those goals. If they consistently hit them, the revenue will follow. A minor shift in focus can lead to increased activity and better predictions on revenue and cash flow.
If the only two metrics you are looking at are revenue and gross profit, your sales will not grow. Instead, focus on your leading and lagging indicators. Make sure your Big 3 are clear, concise, standardized, and understood by your sales team.
Reach to us next to talk about the the Big Three or another top reason why your sales growth has become hindered.