Key Performance Indicators or “KPIs” are the basic barometers of commercial growth. They inform business strategy, highlight areas of operational improvement, and provide insights that help businesses make decisions that will allow them to achieve their desired outcomes.
To be successful, every business must first identify its goals and then take the steps needed to reach them. For instance, if your goal is to increase customer acquisition, collating data that outlines how successful your business is at turning prospects into buyers is essential.
But how do you measure this? It’s simple: analytics. Think of analytics as a scientific approach to growing your sales pipeline by focusing on data. Sales metrics and KPIs have similar purposes, but there are some meaningful differences between them.
Sales metrics are basically data points that measure different aspects of sales performance, telling you how well your business is performing in a quantifiable way.
KPIs are also data points used to measure sales performance, but their focus is on achieving a key business objective—honing sales resources to achieve a singular goal.
In short, sales metrics are more focused on measuring day-to-day success; key performance indicators measure the performance of the metrics that are most important to overall business goals. Here is a resource for learning more about the value of KPIs: KPIs | Key Performance Indicators for Business
How to Develop Realistic Key Performance Indicators for Sales
There’s no question that if you want to scale your sales department, increase revenue, and make sure that your business is a more-attractive proposition to customers than your competitors, developing realistic key performance indicators for your sales department is a must.
So, how can you do this? It’s easy! Just follow the five steps below.
1. Define What Your Business is Trying to Achieve
To decide which KPIs you want to measure, you must first determine what you want to achieve. Do you want to increase conversions? Appeal to a broader range of customers? Target blue-chip businesses in Australia? You’ll need to define exactly what you want to achieve, and in what time frame. This is called setting a business objective. It must be specific and measurable and involve several steps to achievement.
Your basic goal could be to grow sales profitability over time. The objective you set could be to increase your annual revenue by 20% by the end of the year.
Once you have decided on your goals and objectives, the next step is to put accountability measures in place to monitor your ongoing progress. This is where KPIs come in.
2. Choose the Right Sales KPIs
Most businesses have gobs of data they can use to inform their decision-making these days. However, there’s a difference between helpful and unhelpful data.
If you measure everything, you’re going to be dedicating a lot of resources to collecting data that, in the end, might not be all that helpful or even relevant. Not only that, you’re likely to consume a whole lot of resources that could be better spent in other areas of the business, such as client management or marketing.
KPIs that are worth setting have three common objectives:
- Relevant –KPIs must match your business objectives. Think about them carefully. Does “growing the sales department by the end of 2021” equate to more sales? Not necessarily. In contrast, “increasing sales revenue by 20% by the end of 2021” does match a business objective.
- Measurable – once you set your KPI, you need to make sure that you can track your progress. Having online platforms that provide data insight is one way to do this; another is to employ or utilize the required manpower to help you understand all data insights.
- Actionable – does the KPI provide you with the data you need to make incremental improvements to your service offerings that meet your business objectives? If not, the KPI is probably not all that useful.
How to Hit Realistic Sales KPIs
There are several ways that you can make sure to hit your KPIs. While lower-level KPIs can be managed by team leaders, meeting higher-level KPIs that focus on overall business performance may require the input of senior business leaders and decision-makers.
To achieve your KPIs, keep the following tips in mind:
Share Them with Teams and Stakeholders
A KPI that isn’t shared is useless. There’s no way that colleagues and teams will meet any business goals if they don’t know what they are. Perhaps what’s worse is that by not sharing KPIs, colleagues will feel undervalued—even alienated.
Communicating KPIs with teams is important, but how they’re communicated is even more important. Take the time to explain what you’re measuring and why. And listening to your colleagues is essential. Why? Those on the frontline are in a great position to tell you if a KPI is realistic or not.
Review Them on a Weekly or Monthly Basis
Once a KPI has been set, don’t just sit back and wait for the results to roll in. Monitor performance on a weekly or monthly basis. This allows businesses to understand how successful the KPI has been and whether you need to change it.
There are likely to be a lot of variables in terms of making KPIs work. While some KPIs may seem achievable on paper, the reality could be much different. Don’t be afraid to track progress and change your KPIs if they seem unrealistic when put into real-world practice.
Make Them Flexible
KPIs that aren’t easily updated to meet the evolving needs and objectives of the business can become obsolete very quickly. This is true of business KPIs in every sector. Let’s say that you’ve just launched a new product line overseas. If you don’t update your KPIs, your sales team might be left chasing targets that don’t reflect consumer behavior in that region once the products launch.
In this instance, predicting how consumers will respond to a new product line is akin to predicting the lottery. It’s best to set conservative KPIs. Of course, the product line might fly off the shelves, but equally, it could take some time for your branding or marketing to catch on.
By evolving KPIs to reflect real-time consumer behavior, you won’t put sales teams under enormous pressure, and you could discover more-efficient ways of reaching your business objectives.
The Value of Key Performance Indicators
When all is said and done, every business needs to have KPIs. They inform decision-making at nearly every level of the business. Without them, you’ll likely feel like you’re feeling your way around in the dark, searching and never obtaining the insight you need to drive your business forward.
Guest Author Bio: Costa
CMOE guest authors are carefully selected industry experts, researchers, writers, and editors with extensive experience and a deep passion for leadership development, human capital performance, and other specialty areas. Each guest author is uniquely selected for the topic or skills areas they are focused on. All posts are peer-reviewed by CMOE.