How can we measure the interim effectiveness of our sales efforts?
We just hired our first sales person and our sales cycles are longer than most. Revenue is a trailing indicator and we want some reliable leading indicators. What metric should we measure? Appointments? 'Continuations' (as defined in the book SPIN Selling)? Or something else? We have some ideas but want to get others' perspectives.
As you correctly noted, revenue is a great metric, but it is an output. You cannot control an output. You control inputs. Start at the end and work back to the beginning. What are your financial goals? How many typical clients do you need to reach that goal? What is your conversion rate? How many leads create opportunities? How big is the market and how do you find your leads?
When you measure the inputs, you can better influence the right behaviors. When I led the Amazon Marketplace sales team, we established a tiered product listing goal as our quota. Our reps could influence how many items a client could list online. That listing in turn had the potential to be bought and generate revenue.
So, while the sales activity didn’t create any revenue, the fact that an item was no on the site did offer the chance for revenue. Also, in this case, the sales rep was paid on what they produced – listings versus sales.
Sure, it would be great if you were the sales rep who signed up a great electronics retailer who was quickly selling millions in gross merchandise sales, but your effort wasn’t the sole reason that merchant was successful and you shouldn’t be paid on that type of upside. It also helped that each employ had stock options.