Make no mistake about it, sales management is performance management. Sales management is about coaching and ensuring that your sales people do the right things every time, with every prospect and customer, to ensure maximum revenue.
I liked what Joe Capillo said in a trade magazine article, “To maximize revenue, you have to control and improve three factors in the selling equation: Both the number and quality of prospects, your conversion ratio or closing ratio, and the size of average sale.” In order to effectively coach for sales performance, you have to measure the effectiveness of each sales person for each of these three sales factors. What is not measured cannot be improved.
The first step is to establish a set of metrics to measure each of the three sales factors. The second step is utilize the information to help improve your sales people’s performance. As an example, review the monthly performance results of three salespeople below:
Number of prospect opportunities – 250
Number sold- 50
Close ratio – 20%
Sales revenue – $110,000.00
Average sale – $2,200.00
Revenue per prospect opportunity – $440.00
Number of prospect opportunities – 275
Number sold – 44
Close ratio – 16%
Sales revenue – $83,600.00
Average sale – $1,900.00
Revenue per prospect opportunity – $304.00
Number of prospect opportunities – 325
Number sold – 39
Close ratio – 12%
Sales revenue – $58,500.00
Average sale – $1,500.00
Revenue per prospect opportunity – $180.00
Now examine the sales of person A to person B and C. If salesperson B and C had the same success as salesperson A, the company would generate another $122,000.00 in sales. At a 40 percent gross margin on sales, that would translate into another $48,800.00 in gross profit to the bottom line. Also be aware why the poor sales performers had more prospect opportunities compared to salesperson A. The reason – less effective salespeople spend less time engaged with a prospect and therefore have time to visit with more prospects, hurting the company’s sales performance even more.
As you can plainly see, there is a cost to not managing the sales performance of each salesperson. Unfortunately, it is impossible to improve performance if you do not measure performance. Once you start to measure performance, you can begin to coach for performance.
An effective sales manager must lead people. To effectively lead salespeople to improved performance, you must serve them, teach them, role play, guide them, care about them, and support them. You must be out in the sales arena with them, participating in the day to day sales action.
Pay attention to the following sales training tips regarding measuring metrics:
- Lack of information can literally kill your business.
- You must integrate past performance information into your training programs.
- The training initiatives must be tied into improving specific future performance metrics.
Do you have a metrics set up to measure the sales performance of each salesperson? It is impossible to coach for sales performance without performance information. The future revenue of your company depends upon measuring results and using that information to improve sales results with the existing number of prospect opportunities.
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