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KPI's - What do they mean to you?

In an interesting dialog last week, KPIs, or key performance indicators, were the topic but it occurred to me during the discussion that it meant different things to the participants on the call.  That inspried me to write this blog article. What do KPI's mean? And what do they mean to you and your organization.

Wikipedia says: "A performance indicator or key performance indicator (KPI) is a type of performance measurement. An organization may use KPIs to evaluate its success, or to evaluate the success of a particular activity in which it is engaged. Sometimes success is defined in terms of making progress toward strategic goals, but often success is simply the repeated, periodic achievement of some level of operational goal (e.g. zero defects, 10/10 customer satisfaction, etc.). "

With that in mind, what are some KPI's in your organization? There are several key indicators that can be used in the Sales organization. Many companies I work with count number of sales calls or emails. That's good but does it give you the answer you need? From that can you tell you have increased sales? Probably not. In order to study results you need to look at both your CRM data AND your accounting data. You can look at a pipeline report in your CRM - but only if you are positive that a closed opportunity did indeed lead to an invoice.

Here's some examples of KPIs that are good indicators of how your sales are working

Sales by contact method - compare which contact method generated the most revenue - email, phone, direct contact, paper. This one gives you a good idea of whether or not in-person versus electronic works best in your enviroment. This is a moving target, by the way. The younger mindset revolves around email and cell phones - so newsletters and text may actually work better. Do you know which works better for you? You need to track this and then study the results in order to determine that answer.

Sales over a specific period of time - analyze your past revenues - were particular times of the year better? If so, why? Again, tracking sales data is more than just the boss keeping track of where you are. It's real purpose to be able to go back, look at historical information, and make informed business decisions based on the observations.

Quotes to Sales - what is the ratio of quotes to actual sales? If the ratio is very high, something is either wrong with the quoting process, the product itself, or the followup on the quote. Divide the number of quotes by the number of actual invoices for your Ratio number. This is actually a good thing to check. Let's look at the way a lot of organizations operate. Their marketing department has the job of luring in sales opportunities. Sales job is to go out and sell to those prospects. If your quote to sale ratio is high, then the leads coming in may not be qualified enough to generate a sale. Doing some math, let's assume you got in 50 leads and closed 10. Dividing 50 by 10 gives you 5. That means your Quote to Sales ration is 5:1 (5 to 1). That's not a bad number. However, suppose you get 50 leads but only turn 2 into a sale. Now your ration is 25:1 meaning you are expending a lot of energy but not getting enough results. This would be a good exercise with your CRM. Count the number of quotes against the invoices generated. What is your quote to sale ratio?

These are just a few examples. There are lots of ways to analyze your business and look for ways to improve your bottom line. You are the ones that make those decisions. The data trapped in your CRM systems has answers that can point you in good directions. You just need to take the time to go look. And you need to understand what is a good predictor within your world for good results. Only you can answer that question.

Dashboards are a great tool to quickly view KPIs.  You have to know what you are tracking first.  But once you know that you can develop multi-panel graphic views of your data.  CRMs are good at tracking initial contact.  You will need to use something like Excel or other reporting tools to look at comparisons of Sales versus Actual Revenue.  Typically revenue data is kept in ERP and Accounting systems.  There are several tools out there that can accomplish this - don't look only at your CRM or ERP system because unless you are using one of the all in one systems, the data lives in separate places.

In summary, what are your key performance indicators? Figure them out, go look at your data, and see how it matches up. Make sure the data it there in the first place. Nothing in means nothing out. Once you read the results - do they agree to what you thought? Are things happening the way you expected? Take the time to feel the pulse of your company and you will reap the rewards in improved revenues.

Patricia Egen Consulting, LLC

803 Creek Overlook, Chattanooga, TN 37415
Main office: 423-875-2652 • Arizona office: 480-788-7504 • Florida office: 754-300-2827