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How Sales KPIs maintain Motivation – a guide for the sales professional

Seasonal patterns of demand in business really challenge the motivation of even the most professional sales people.

We all feel the highs associated with closing a big sale, and most us confront the lows of an order drought. In most businesses these cycles are part of the landscape, and there is little room for manoeuvre.

There is a solution that neatly resolves the problem by providing feedback on the positive value of continuing sales effort during the lean times. I call it a Sales Process KPI Model, with the added benefit that it gives you a reliable sales forecast in a dynamic business environment.

How does it work?

It is an Excel workbook that tracks the increased Expected Value of each prospect as milestones in the sales process are completed.

If every prospect is recorded, the eventual value of the sale estimated, and multiplied by the increased probability of securing the order, this gives you the expected value at this time.

Add up the expected value of all your prospects and you can get three important bits of information.

• Your current best estimate of the Total Value (TV) of sales if you close 100%.
• The present Expected Value (EV) of all your prospects.
• The % of expected value to total value.

These are your top level Sales KPIs.What do they mean?

The value of adding suspects and prospects into your database is recognized by the increase in total value.

The value of your work in progressing all your prospects through your sales process through to completion of the sale is tracked by the increase in Expected Value.

A positive change in the ratio of the two numbers is further confirmation that your work will pay off.

A real live example will illustrate both the issue and the solution.

One of my clients operates a ferry business. It is a highly seasonal business and is weather dependent. Sales and profits are high in summer, and every winter brings cash flow problems. Summer is also the peak demand period for private charters, and these are the difference between prosperity and poverty.
A new sales and marketing manager has been appointed to increase the charter business. She is bright and personable, with all the characteristics you like to see in a person with a challenging role. She is facing a tough winter, with few opportunities for firm bookings. As soon as we get to our southern spring she will be rushed off her feet with last minute bookings for Christmas and New Year parties.

She is using my Sales Forecasting model and after just 4 weeks it is proving its worth. This is what she said to me last week.

“I have added new columns to the worksheets so that it is a full working database of prospects, and have all the contact points and information on a single page. That really saves me time.

Each week I add in new prospects, even though they are thinking about a charter 6 to 12 months away. As my list grows, I can see the increase in value that my work has generated. The expected value grows steadily.

When I sort the prospects by month I can see the value for that period, and I can follow up at the right time to confirm the booking and take the deposit.

I can plan my marketing and promotions well ahead to ensure I get the lead times right.Best of all, when the owner asks me how things are tracking, I have three numbers to show him what I have achieved, even though there are only a few firm bookings for the winter period”.

When she was appointed, I was concerned about how her high motivation would be maintained through a tough winter. I am delighted by the realistic feedback she gives me about how it is working for her.

The sales forecasting bonus

I love to get something for nothing. Any time a business process solves three problems I win.

The model is an activity management tool for the sales professional, because the individual prospects that will increase the KPIs I you work on them stand out.

It tracks every prospect, and puts a value on them all.

It gives you a reliable sales forecast.

There are a few secrets to making this model work that I would like to share with you.

Secret 1: Do not guess the probability of making any particular sale.

list the stages in your sales process, and use past experience to estimate the probability that a new, unknown prospect will be turned into cash in the bank.

As each milestone is achieved your probability number should increase. Even receiving payment is not a certainty as checks have been known to bounce.

Secret 2: Use the 3 KPIs to track progress and highlight problems early.

• Total Value (TV) of the sales pipeline.
• Expected Value
• (EV) of the sales pipelineEV/TV %

Any increase in any of these sales KPIs gives you a direct measure of the effectiveness of your work. You are no longer dependent on the flow of new orders to measure your results.

Secret 3: Focus on balance of activity rather than orders.

If each prospect is moved through the sale process at the right pace, and in the right way, the orders will come.

Secret 4: Track the accuracy of your forecast and adjust the probability factor.

Compare forecast sales for the month with actual. Compare success rates at each milestone.

Then you can adjust your probability factors based on real experience. It is just like sighting in a rifle.

If you use this approach it will keep you on track when times are good as well as when times are tough. You can maintain your focus on making sure that you keep every aspect of your sales process under control. You can avoid missing follow up opportunities, and this alone will increase your sales.

Feedback on progress is the best motivator for every sales professional.

About the Author

Michael Taplin earned recognition as a KPI modeling specialist and business strategy consultant in Australia 20 years ago. He put his sales experience to good use in training manay sales teams as a consultant. Today he lives in New Zealand and contributes his ideas on better business performance through www.bizlearn.biz, where is newsletter is available as a free subscription, and you can also download whitepapers and tutorials on a range of topics. 14 years as a volunteer business mentor has influenced his approach to small business and helped to adapt big business ideas into useful practical stuff for small business owners. Review KPI models at bizlearn KPI tutorials and forecasting models at bizlearn Forecasting

Sales Forecasting with BCM

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