KPIs and Why They Matter in Sales

Intro: You’re listening to The Sales Focus Podcast. Your go-to for developing high-performing teams, next level sales skills, and real results. It’s time to get focused.

Welcome back to The Sales Focus Podcast. I’m Tony Horwath, founder and CEO of Sales Focus. This podcast was developed to help sales people improve their sales skills, to learn some techniques, some tools that they may not know, and also help businesses develop professional, ethical, and productive sales teams. Today, I’m going to talk about something that everybody hates talking about: KPIs. Salespeople hate them. Managers love them, sometimes too much, or they reenforce or force them down on the salespeople. Are KPIs important? They are.

First off, what is a KPI? KPI stands for Key Performance Indicator. It’s an indicator. It’s not guaranteed. It’s not in stone. It’s an indicator. When I look at KPIs, I really divide them into two sections. I have performance and activity. So, if I’m looking at KPIs with any salesperson, I always look at it from a quota perspective, and then, what is it going to take on a day-to-day, week-to-week, month-to-month perspective to hit those goals?

So, when we’re developing KPIs, it’s really important to understand what the end result is and what you’re looking to do, but I want to talk about what are KPIs, and why you development KPIs. It’s really to implement a process that allows salespeople to know , especially early on, what it generally takes in order to achieve specific goals that a company is trying to achieve. Now, I know a lot of people love to say “sales is all numbers, and the more numbers you do, the more success you’re going to have.” Well, I’m going to debate that. I’m going to say that’s not necessarily a true thing because if I take two sales people and they do identical activity levels, you’re not going to get identical results because some salespeople are just better than other salespeople. They communicate better. They understand value proposition better. They understand how to talk to a client in order for them to understand what the value that you’re bringing to the table is.

I’ve had many clients come to me over the years, so adamant about “I want to know what the KPIs are! Let’s establish the KPIs. What happens if a sales rep doesn’t hit their KPIs on a daily basis or weekly basis?” And trust me, we track KPIs just like every other business, but what’s really important to understand is that the KPIs are an indicator of what it should take in order to achieve the minimum success of a salesperson. As an example, we have many sales teams. We have teams across the country. Hundreds of people out selling, and let’s say that sales team, feet on the street, maybe they have to knock 30 doors a day. They have to visit 30 people. The reason we say you have to visit 30 people is because out of those 30, you’re probably only going to talk to 10 people, and out of those 10, only 5 of them are going to really listen to your presentation, and out of those 5, you may get one or two opportunities. We would love for you to close, but more than likely, you’re going to generate opportunities that are going to fill your pipeline. That’s going to give you the results at the end. So, if you look at it, every single day hitting 30 doors, every single day talking to 10 people, every single day generating one to two leads, and then, you can look at what your close rate it. Is your close rate 10%, 20%? Then, you start knowing what to expect at any given time when you bring in new salespeople, and you can also forecast out. So, for a business owner, it’s important to understand what it takes. It’s important to understand what I need to tell, especially to my new salespeople, what they have to do on a daily, weekly, monthly basis.

We have some programs that are hard and fast about KPIs. You must hit 20 doors a day. You must knock 30 doors a day. You must make 100 phone calls a day. We have some clients who are very adamant about that. I believe that it should be based on the results of the salespeople as well because if I have a salesperson, that maybe let’s say the KPI is 100 calls a day or 30 knocks a day, but they’re having more conversations, meaning they are able to get past the gatekeeper, talking to the decision maker, and they’re generating more opportunities on daily basis, and maybe their close rate is even higher. Am I going to be as concerned about the 30 knocks or 100 phone calls? No. I’m concerned more about the results. So, when I told you I break it down into two categories, results and activity. Results is first. First and foremost, I want to see the results. I want to see sales. I want to see revenue. I want to see new clients, and if a salesperson takes the minimum, maybe it’s 20 knocks for them because they are really good at what they do, and they have really good conversations, but they are still getting the results, or even better results than some people that are having to hit 40 doors a day or 120 phone calls a day.

So, I want you to understand it’s not hard, fast, and true. It’s not the same for every salesperson. Numbers are important in sales, but it’s not everything. Math doesn’t lie. Math is important. Numbers are important, but for a salesperson with really good skills who really works on their technique, who really develops a good sales technique and conversationist and has what we refer to as intelligent conversations with people, those quality salespeople will start getting away maybe from the high end knocks or the high end phone calls and really focus on: Am I building a pipeline? Am I converting deals? Is my ratio better than 10% on close rates? All of those things really factor into it.

So, if I’m building a sales team from the beginning and I don’t know what is typical in an organization, which happens to us all the time, I have to look at what the goal is, what you’re looking to achieve first, whether it’s revenue or new clients, and then, I have to work backwards. So, I have to take it from the end, if you will, the amount of revenue let’s say. How many deals does it take to make the revenue? Then, how many visits does it take in order to get a 10% close rate in order to generate that revenue? And then. we have to backtrack all the way back to that activity level that will hopefully give us the numbers that we’re looking for.

So, if your manager come to you and says “hey, I need 100 doors knocked, and I need 50 conversations,” and I need that and I need that. I think the best thing to do is to really look at it and say okay, what do I need to accomplish in order to achieve the end result? Remember, revenue is king. New clients are king. So, if you’re doing it in less knocks, less activity, because you’re better. You’re smarter. You know your product better. You know your company better. You have better conversations. You understand personality types. You know how to converse with people. You have a real interest in solutions for your client, and maybe you’re in that top 10% of salespeople. It becomes less and less important what those activity numbers are as long as you’re achieving or over achieving on the quota numbers.

So, take it from someone who’s been in sales for a long time, 30+ years. We’ve launch thousands of sales teams. We’ve hired and managers over 30-thousand salespeople over the years. Salespeople are very different, skill-wise, activity-wise, all those things factor into it. I always say this. The number one thing I look for in every salesperson is work ethic. Now, that ties directly into KPIs, right, activity, but work ethic also means working smart, right. Understanding your product. Understanding your company. Understanding the solution that you can provide to the customer. All those things factor into it. So, number don’t lie. Math’s important. KPIs are definitely important, and for any new organization, if you don’t know how to establish KPIs and really set them up for your company, reach out to us. Come visit us on sales focus inc dot com. We can help you establish what KPIs should look like and what kind of salespeople you need in order to achieve you goals. Appreciate the time today. Until the next time. Focus on your success. Thank you.