J12 Commercial Excellence Playbook — 10 Questions to Effectively Measure Sales Impact
Part 5/10
Which sales metrics should a company be reporting on? The metrics that will be of value to you are dependent on your Go-To-Market (GTM) strategy. This strategy, or these strategies, will consequently determine the KPIs that are most relevant and impactful for you. Carefully defining the relevant metrics for long-term growth and positive impact on your customers when scaling is the key to understanding whether your value proposition is effective or not. And ultimately you need good data and processes to analyse that data for it to be an impactful navigation tool. To determine whether the sales metrics you track are suitable for your long-term company goals — here is a set of 10 questions to ask yourself and your team.
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The Need to Knows of an Impactful Sales Machine
When perfecting your sales machine, the focus is often on the input e.g the behaviours and the activities of your company or individuals. On the other hand, the output e.g the consequences of actions and decisions made by the company or individuals within it. This is commonly referred to as your Return On Investment (ROI) and is essentially, the ability to measure, track and report on outcomes directly as a result of your inputs. The output is the holy grail within sales as it gets right to the heart of your impact on customers, and the market.
People within sales are often highly target-oriented personalities that like the challenge of an ambitious set of KPIs. Nevertheless, depending on the size of your company, and sales force, some metrics mean more or less. At an early-stage you are likely to care about lead indicators i.e. signposts that show you are on the right track towards your specific financial/operational/commercial company goals. At a later stage, the operating margin, customer churn and/or renewals will be key importance to understand.
Create a culture of ownership, experimentation and optimisation around your KPIs — review weekly, deep-dive monthly, and use in your business review (ultimately with customer quarterly business reviews — QBRs) quarterly
A reliable guiding principle that I’ve learned over the years is to measure what really matters and keep it simple. Ask yourself what moves the needle for the business. There is a brilliant best-selling book called “Will it Make The Boat Go Faster” by Ben Hunt-Davis (former Olympic Men’s Eight rowing gold medalist) and Harriet Beveridge. The book is about setting a crystal clear purpose (goal) on what you want to achieve (outcome) and then putting in place a structure, framework of measurement, and pathway to foster a performance-based culture to achieve the desired result. Many of the principles and techniques outlined in the book apply themselves to how one can think about measuring impact in sales.
Further Reading: Will It Make the Boat Go Faster by Ben Hunt-Davis and Harriet Beveridge.
So, with that said, let’s go ahead and break down the questions that will guide you to prioritise relevant metrics.
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What is our overarching KPI for the business?
This is normally revenue. But revenue is driven by many factors e.g. the quality of your sales team, how well you attract talent as well as onboard, train and retain them, the number of relevant inbound leads etc. Revenue comes in many shapes and forms. You can choose monthly recurring revenue (MRR), annual recurring revenue (ARR), service revenue, hybrid models, and the list goes on. For a company at seed it can be beneficial to not alone focus on revenue but explore nuances in what you are measuring e.g. number of users on the platform, number of repeat customers, number of pipeline coverage — these are often good proxies for revenue.
Further Reading: Startup Metrics by Visible VC, 16 Startup Metrics by by Jeff Jordan, Anu Hariharan, Frank Chen, and Preethi Kasireddy at 16z.
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What activities are going to support achieving our overarching KPI?
This could be field sales making sales calls, sending emails or leveraging your community of existing customers to drive sales. If your sales efforts are product-led, where customers are allowed to discover and test your product, demos become a key conversion stage in your sales process.
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What is the cadence we should measure our (chosen) KPIs by?
At early stages the tendency amongst companies is to measure everything, all the time. To some extent, this is fine but can often result in analysis paralysis. Planning ahead of time, and making sure there is a balance between what and how much you measure as well as the frequency and cadence at which the data is actionable and remains relevant to your overall business goals. Monthly cadence is usually the rhythm that companies land on, with a lot of SaaS businesses then often moving into quarterly cycles. Within this, some metrics will fall into one or the other.
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Are we focused on topline revenue growth, gross profit or net profit?
In general, at early stages the focus is on revenue growth, evidenceS of Product-Market-Fit and the ability to scale. Sustainable unit economics i.e. the breakdown of every £/€/$ you earn and what makes up your cost of googds sold(COGS), overheads (operating expenses or OPEX) and profit margins (gross margins, GM and operating margin/net margin, OM). Depending on what you define here, this should be tied into your sales related KPIs. It is important to capture nuances when prioritising metrics to ensure comparability and consistency over time, as your company grows.
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What data do/can we collect today and where are the gaps in our desired data set?
Knowing to what extent your house is in order on your current data set is important. Having line of sight on how much you may need to bridge initially on collecting data and how you collect it is helpful (i.e. manually, semi-manually or in an automated fashion). However, you should never set your KPIs to make it easy to track but rather in alignment with your short-term needs and long-term goals. If there are gaps in your data, create a clear plan on how to address them. Reporting through excel is ok (for a period of time) but always be ambitious to systematically report as you grow.
Further Reading: The Top 10 Data Discovery Tools That Get Results by Eyal Katz.
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Do we have tools to collect, track and report on our KPIs to automate the process?
When you start to systematically collect data towards your KPIs you will need an appropriate toolkit and software systems to do this effectively. Most likely you will need an ERM or a CRM, or both. The latter automates customer interactions and insights, the former automates processes and operations. You will also have your own SaaS platform with a data and analytics back-end. Evaluate if these systems enable you to collect, house, track and report on the KPIs you need to measure.
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How does the industry and our (potential) customers think about success metrics and KPIs?
It can be valuable to feed in an outside in view on what KPIs are relevant for your business model and proposition. By understanding how your peers and customers think about success and how industry analysts report on measuring success in your field, you get a starting point of what it is you should be looking to demonstrate and evidence out with your own offering.
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Is what we are planning to measure, within our control?
The old adage of only worrying about what you can control is as relevant with KPIs as it is anywhere else. Measure what your sales team can own and directly influence (calls, meetings, demos done, bookings value, ACV, gross sales). All metrics are often not in the hands of the sales teams so be aware of this when setting sales KPIs.
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Who is the appropriate audience for sharing the data with?
Referring back to analysis paralysis there are many things you could collect but always ask yourself and your team if you should collect them. What is the data point or KPI actually telling you and importantly, what are you doing with it? You always want sales metrics that are actionable, but also understood within its context. Meaning, they need to be thoroughly analysed in their context yet presented in a simple and actionable way to your audience, which could be executive management, sales team or the entire company.
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How are we going to use (action) the data that we will collect and report our progress against?
Any sales KPI that is measured should lead to an outcome. KPIs are there to guide decision making, to help you set strategy and to objectively determine whether you are on course towards your functional, and company goals. To be effective, KPIs should be embedded into the cadence of your business and used in the forums you use to discuss targets, progress and priorities. These can be forums such as board meetings, quarterly business reviews, performance reviews, weekly and/or monthly team meetings, budget process — the list goes on.
For simplicity and ensuring your KPIs remain actionable, creating a KPI dashboard that uses a RAG (red, amber, green) report status scoring can be helpful.
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5 steps when settings sales KPIs to ensure you measure effectively
Set your financial sales targets (revenue, margin requirements etc).
Define your KPIs that are going to measure success against these (remember less is more).
Choose performance lead indicators to guide your process (these are the outputs that will give you confidence you’re directionally on track to your goals).
Set activities that are going to drive your performance indicators towards your KPIs and financial goals (the inputs to deliver your outputs).
Once you have chosen which metrics are the right ones for you, set everything up in your CRM or Business Intelligence (BI) system to track and report on your KPIs, underlying activities and performance indicators. Ideally these are available in real-time. Review as per your agreed cadence, e.g. weekly, deep-dive monthly, use in your business reviews quarterly.
Further reading: Glossary of Key SaaS Terms by Oxx
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Access the google slide templates here:
The J12 Commercial Excellence Playbook — All Template Slides (2022).