7 Pillars of Successful Businesses: The Importance of Having The Right Sales KPIs
Sharon: Good morning, this is Sharon, and I'm here with Steven Kohnke from Denver Business Coach. Good morning, Steven.
Steven: Morning, Sharon. How are you doing?
Sharon: I'm good.
Sharon: So, what is our hot topic of the day today?
Steven: Yes. So as you know, business owner... As for a business owner it's sometimes helpful to really think of your business as not just this product or this service that is delivered, but as a bunch of technical different areas in the business that really need to be focused on and maintained regularly. So, what we've done here is really broken down these bigger components and to the foundations into leadership, sales, marketing, operations, financials and H.R. and really put together this series to help business owners out there with some tips and tricks and how to improve these areas. But today, we're really focusing in on that sales pillar and more specifically, having just a clear understanding of sales KPIs.
Sharon: Great. So, what does it mean to have a clear understanding of your KPIs and if you don't mind, just for the beginners out there who might be watching this, what are KPIs?
Steven: Yes. So KPI stands for key performance indicators. And really scoring high in this market means you as the business owner, you're diligent, you have diligently thought of and tested and really came up with most effective numbers to be paying attention to. That's telling and drives the focus of the business, drives the success of the business. That clear and understanding, that clear understanding of what, you know, what I refer to as the lifeblood sales, to bringing in the money to the business, to help it live, to help it survive, you need to be paying attention to those. And if you're just kind of saying, hey, when someone calls me, I'll tell them what I do. And if they want to buy, they buy. But there's clear steps in here and understanding what the key performance indicators in sales specifically is a really good thing to be paying attention to regularly.
Sharon: Well, thank you for that thorough explanation and introduction, so to dive a little bit deeper. Why should business owners be measuring KPIs in different areas of sales?
Steven: Yeah, that's so what you measure, you can manage what you manage, you can improve, right? So, really having good KPIs will help you as a business owner, understand how your business measures up and what to do about it if it's not really quite hitting the mark that you set out to be hitting. Every area of the business should have KPIs, but especially the sales piece. You know, understanding the basic sales metrics like conversion rates along with your sales process, will allow you to understand maybe where prospects are dropping off instead of just saying, hey, we're not making as much sales. You have a very specific place to focus in on if they're dropping off after the first conversation, second conversation after proposal is sent. And then you can really key in on why there's a big drop off and improve that one specific area. Because if you're just saying, I don't know, let's try talking about this in the first conversation when really the first conversation is good and you wouldn't understand that if you weren't tracking the conversion rates along the process. If that makes sense.
Sharon: Yeah, completely. So you've done a great job really underscoring the importance of understanding KPIs for sales. How does a business owner go about this and really start to implement a good sales KPI tracking system?
Steven: Yeah, that's... It can be a long answer, but there's different stages, right? There's different sophistications of KPIs. And, you know, if you're not already tracking sales and sales metrics, your KPIs really the standard ways of understanding your process and seeing the conversion rates, getting just that basic level of understanding of what's happening in sales will help you immerse yourself into what KPI tracking really is. And, you know, if you are a little bit more advanced in the sales KPIs area, customer lifetime value is a really great one to be tracking average revenue per transaction is a really great one. The average length of a sales cycle, those are all really nice KPIs that any business owner or any sales department, any person in sales can be watching and paying attention to and making sure that, for instance, a sales cycle, if you have a three month sales cycle and you set out to trim that down to a month and a half, you can work on very specific activities to say how can we get people to buy faster? So, it's just ways to help increase the effectiveness of your business.
Sharon: So I guess the final question as we wrap up here, there may be some viewers out there like me going, gosh, this is an area that I really need to work on. So, how can someone get some help with this?
Steven: Yeah, well, the easiest way, give us a call, this is what we do. Really understanding what the right metrics are to be paying attention to what you want to change, what you want to measure and improve. The easiest way to get a hold of us is the website denverbusinesscoach.com. And any of our coaches would be happy to have that conversation and they love doing it, too. So, KPIs are fun.
Sharon: Awesome. Thank you. It was great talking to you this morning, Steven.
Steven: Thanks, Sharon. See you next time.
Sharon: All right. Bye bye.