We tend to be optimistic in our estimations, but we should be realistic about them. Deciding on the KPIs that you should be measuring and paying attention to as a consultant really comes down to your particular sales system and your sales playbook.
In this episode, I’m sharing:
How to determine the pace of your sale
The KPIs you should be using
How to put the metrics we gain to good use
Take into account the speed at which you operate. For instance, the slower it takes to bring a deal to fruition, the more you look at leading indicators, rather than bottom line metrics. On the other hand, the faster your business and sales cycle, the more you want to focus on bottom line metrics, and not so much on leading indicators. Determining the speed of your sale will help you find the best way to track your metrics based on your individual process.
I’m recommending five KPIs to use in your sale, but there are definitely more. Starting with the sales opportunity itself, you’re able to identify the number of opportunities that arise, their dollar amount, initial meetings that create the opportunities, number of proposals, and percentage of deals closed. Remember: more opportunities isn’t always better. We want the right range and revenue for them.
You have the metrics, now let’s put them to the test. What you want to know is where the sales are coming from, who is bringing in the sales, and which things are being sold most effectively. You’ll also learn where should you be marketing & concentrating your efforts, who are your top performers, and which service lines are bringing in the most revenue and profitability?
Sales KPIs will also tell us how successful we are in our different sales and marketing channels that are designed to bring in leads, in addition to the relative success and output of different channels.
Mentioned in this episode:
For more information on remote selling and a complete list of links mentioned in this podcast, visit this remote selling article on our website.
Sales KPIs for Consulting Sales:
We humble humans absolutely suck at estimation and planning. In a 1994 study, 37 psychology students were asked to estimate how long it would take to finish their senior thesis. On average, they estimated 33.9 days. Now, they were asked on the low end, if everything went perfectly, how long would it take you to finish your thesis? And they said 27 days. And on the high end, if shit really hit the fan and things went as poorly as they absolutely could, how long would it take? And they said 49 days. Here’s what actually happened. The average completion rate wasn’t 34 days, it was 56 days. And only 30% of all of the students in the study completed their thesis in the amount of time that they predicted.
Now, this probably doesn’t come as a surprise to you. If most of us are asked the question, “Should you save for retirement?” We would say yes. Then, if the follow-up question was, are you saving enough for retirement? Many of us would probably say no. And this is true all across estimation questions. When you ask people on their wedding day, “How likely are you to get divorced?” Which, personally, I find a very distasteful question due to the timing. But if you ask people that question, they say, “Zero. I will not get divorced.” Now, obviously we know that that’s not the case. Some people do get divorced. If you ask entrepreneurs, “How likely is it that your business will fail?” They’re going to grossly underestimate. The reason is that it turns out we’re optimistic.
So, what I just talked about is called the planning fallacy, and it was first identified by Daniel Kahneman and Amos Tversky, also the authors of Thinking Fast and Slow. What I’m talking about now is the optimism bias. It causes us to believe that we’re a lot less likely to experience a negative event than we actually are. Now, this bleeds through into your sales. We’re optimistic. It’s just the way we are, more optimistic than we deserve to be, more optimistic than is safe for us and for our businesses. And the way out of this optimism isn’t just mindset, although that may help, but it’s about measurement. So in today’s episode, I’m going to be talking to you about key performance indicators that you should be using in order to ensure that your sales are going to hit the targets that you expect that they will.
Welcome to Modern Sales, a podcast for entrepreneurs, business owners, and sales people looking to have more and better conversations with your perfect clients. You’ll get a healthy scoop of psychology, behavioral economics, and sales studies to help you create win-win relationships. I’m your host, Liston Witherill, and I’m pleased to welcome you to Modern Sales.
So yes, we are notoriously bad at estimating. When asked how long it’s going to take something or how successful we’ve been, we tend to look on the bright side for many reasons beyond just optimism, I would say. We like to think of ourselves as knowing what we’re doing. We like to think of ourselves as people who make good decisions. We like to think of ourselves as on the ball. And all of that leads us astray, or I should say it can lead us astray, when it comes to selling, because selling, in some ways, is the ultimate report card of how well we did our homework in the way that standing on a scale is the best way to know how well your weight loss efforts have gone. It’s the same thing with sales, right?
Understanding exactly what’s happened can really come down to dollars and cents. The problem with that, especially in a consulting context is we don’t control all of it. We control only a portion. And in consulting, the amount of money that’s going to come in is greatly variable, and it tends to be very lumpy and concentrated. So, what does this mean? We should be looking at metrics, KPIs, key performance indicators, because it helps us forecast and improve what we’re doing. It also helps us see what’s going on, what’s working, what’s not working. KPIs help us do all of that.
So, I got a question from a listener and that question is, what KPIs should you measure as a consultant if you’re looking to improve your sales? Now, of course, because I’m recording this podcast, I have all sorts of thoughts about that. But, I do want to challenge you to think about something first, because I could give you the first KPIs that come to mind. I could give you every KPI in existence. There’s lots of them. The reason there’s more than I should cover here is because the KPIs should be very specific to your particular business and the sales roles within your company that you are looking to either improve, if you’re in one of them, or if you’re looking to manage those roles.
So for example, I’m just going to give you a couple of examples and you can make a determination what might be important to you. If you have people whose job it is to set meetings, so business development reps or sales development reps, SDRs and BDRs, they’re often called, you’re not going to measure them by the same metrics as someone who is a subject matter expert. The success for those separate roles is so sufficiently different that you couldn’t really have a lot of crossover in how you measured how successful they’ve been.
Similarly, things that are built into their compensation package should be the focus of the metrics that you’re looking at. Now, if you can’t look to someone’s compensation package for key performance indicators that would be relevant to not only that role but also that would be relevant to your bottom line in the sales program that you’re looking to evaluate, it may be time to rethink their job contract or their compensation package, because it should be reflected in there.
Another example is the velocity of your business and your sales cycle. The slower it takes for you to bring a deal to fruition, the more you will want to look at leading indicators rather than bottom line metrics. Conversely, the faster your business and the faster the sales cycle, the more you want to focus on bottom line metrics and not focus nearly as much on leading indicators.
And as a final example, if you have a very large team, you’ll be looking at geography. How well are geographies performing comparatively? If you have a large team, you may be looking at service lines. Which services are selling the best? And a built-in assumption there is that you’re a manager. If you’re not a manager, if you’re an individual looking to better evaluate yourself, obviously you don’t care nearly as much as what the rest of the team is doing except that it helps you set a baseline for your own performance.
So with all of those things in mind, the way I would summarize this is deciding on your KPIs and the KPIs that you should be measuring and paying attention to as a consultant really comes down to your particular sales system and it comes down to your sales playbook. What does an ideal sale look like? What actions and steps lead to success? So, keep that in mind as you listen to this.
And now, the moment you’ve probably been waiting for. I’ll just go ahead and answer the key performance indicators that I would recommend most people pay attention to in selling roles for consulting. So if you’re a consultant who’s expected to sell, the number one thing I want you to start to look at is sales opportunities created. Now, the reason I think this is crucial is because what I find most of my clients have is not an optimization problem. It’s often just a volume problem to begin with. Now, everything starts out like that. You’re going to have to find the balance between volume and optimization. But, what a lot of people are facing is that they just don’t have enough sales opportunities.
Now, I want to take time to also define what is a sales opportunity. Because once you start measuring things, you’ll find people like to count more and more of everything, no matter how quality it is. So, you will have to have a definition for what qualifies as a sales opportunity. Now, just to go really basic with the definition, a sales opportunity is when someone who fits your right client profile, or your perfect client profile, has a defined problem that is one that you can solve and you also understand a rough timeline and budget for this person. If those things are true, absolutely we will call that a sales opportunity. In fact, that may even be seen as a relatively strict definition of what a sales opportunity is. So essentially, there’s some qualification built in to this idea of number of sales opportunities because we’re saying we’re definitely not going to count every opportunity that we have with anybody who expresses interest in working with us. We’re only going to count those that are with people who look like they could be perfect clients of ours with a defined problem and we understand a ballpark of their timeline and budget.
A note about timeline, I don’t want to count things that are two years off as sales opportunities. We don’t want to count those. What we want to count is usually opportunities that are going to close certainly within 90 days, but often within six to 12 months. Again, this is very dependent on the velocity of your sales cycle.
If you would like to learn more about qualifying leads, you can go back and listen to episode eight where I talk about qualifying leads and just how strict you should be in your qualification process. But, number one for sellers, number of sales opportunities created.
The second thing I want you to look at is the dollar amount of those opportunities. So, I’ll just ask a question. As a seller of consulting services, would you rather have 10,000 opportunities for $10 or 10 opportunities for $10,000? Well, obviously this is a no-brainer question. The reason I did it is to show you that more opportunities isn’t always better. What we want is the right opportunities and we want the right revenue range for those opportunities.
Now, a little bit of a wrinkle here is that new sellers starting out, by definition, probably won’t have much repeat business, which means that their dollars per opportunity on average will be lower. No big deal, but worth pointing out. Another little wrinkle in the dollars per opportunity is that new clients typically will spend less money initially in order to build trust and feel and be assured that you’re credible and can actually solve their problem, so typically escalates over time. So, those are a couple things to think about, but dollars per opportunity, great indicator of the overall health and quality of those opportunities.
The next key performance indicator I want to cover as a seller, a consultant in a selling role or who has selling attached to their job description, is initial meetings related to a specific sales opportunity. So, going back to this idea of having a sales playbook, my overall process is essentially lead discovery, offer presentation, negotiation, contract. So, that discovery part, moving from lead to discovery, that’s when we go from we have identified a sales opportunity to we have a mutually agreed upon meeting regarding that sales opportunity whereby we discover what’s going on with this client. That’s going to be a key choke point in the process. If people aren’t willing to meet with us, they’re not very serious about the opportunity, and we don’t want to put much weight into it.
So, having those initial meetings is really, really crucial. Now, how you structure those meetings, and what happens within those meetings, and what happens next after the meetings, all of that, again, will be in your playbook. But, we know by definition that if we’re creating more opportunities and we’re having initial meetings and the dollar amount of those opportunities is where we want it to be, we’re off to a really good start. So, that’s the third one, initial meetings.
The next indicator I want you to look at is the number of proposals sent. And of course, you could also tie dollar amount of proposal sent to this one. Now, of course, our primary goal as consultants and people who are selling consulting services isn’t to be professional proposal writers. But, the language of our business and the norms for how we land business for ourselves really do dictate that a proposal is necessary. I would say anywhere over the, say, $2,000 mark. So, that’s encapsulating of most consulting.
So, you really need to send a proposal. You need to send great proposals, and there’s tons of optimizations you can do for proposals. If you want to learn more about my recommendation for consulting proposals, you can go back and listen to episodes 11 and 12. But, sending enough proposals is, yet again, another key choke point, and I would want to make sure that enough of those are being sent.
Again, if you have specialized people who are sending proposals and doing nothing else, your KPIs for them will be different. But if you are the center of the proposal or you manage people who send proposals in addition to managing the rest of the sales process, this will be something that you definitely, definitely want to look at.
Now, the next thing you want to look at is percentage of proposals one. Now, it’s tempting to think that our goal is to always drive the percentage of proposals that we win higher and higher. But, there’s actually a really, really big problem with that. The problem is if we’re grading our team on the percentage of proposals that they’ve won, they know that at the margin they’re not going to take a risk on proposals, meaning they’re only going to sell proposals they’re sure they’re going to win. And that, my friend, is not a great way to do business.
We want to take some risks. We want to take chances and try new opportunities, maybe with new clients, with new service lines. We want to encourage that. Obviously not to the degree that it eats away all of our profit, of course not, but having a singular focus on percentage of proposals one will definitely decrease the number of proposals sent.
So, while we do care about driving higher the percentage of proposals one, we still want to see a healthy number of sales opportunities, and we still want to see a healthy dollar amount per opportunity, and we still want to see a healthy number of proposals sent. It doesn’t do us a whole lot of good to win more proposals if we send 1/10 as many.
So, those are the five KPIs I would recommend for consultants in a selling role. If you have no program going right now, that should be totally sufficient for you to get going. And just to repeat, those five are number of sales opportunities created, dollar amount per opportunity, number of initial meetings, number of deals progressing to a proposal sent, and number of deals actually won.
Now I want to turn to the managers, because what the manager’s pay attention to might be slightly different. There’s definitely more of an overall view of the sales program from a manager’s point of view where you’re rolling up with all the individuals are doing. But, you also may want to slice and dice this a little bit differently, particularly in a consulting company. So, the number one thing, number of sales opportunities, that’s still something that we cared deeply about. We also care deeply about the dollar amount per opportunity. We want to know that we’re selling the right sized projects, not too big, not too small, on average.
But, the other thing that you want to look at is total pipeline. And depending on your individual stages within the sales process, you’re probably going want to weight this. So, here’s what I’ve seen when I’ve worked with lots and lots of CEOs and firm owners. They’re very optimistic about the deals that come in. So when I ask them, “Please rate the percentage chance that you’re going to win that deal,” they typically say 90% or greater, which again, we know not true. They’re also extremely optimistic about how fast that deal’s going to close, and they’re also very optimistic about the total dollar amount of that deal.
But, here’s what naturally happens as you progress a deal through your sales pipeline. Number one, each subsequent stage brings with it an increased probability of closing that deal. So if you have a bunch of meetings, and then you send a proposal, and then you schedule a proposal review call, and then they’re going and talking to their legal team to make sure that the contract meets their legal standards, each of those stages subsequently increases your chances of winning. The reason for that is your client’s probably not going to spend all of that time if they have no interest or legitimate desire to do business with you.
The other thing that’s going to happen is as that deal progresses through your sales stages, you’ll have a better and better idea of exactly what that deal is worth. One of the challenges of consulting is there’s lots of things that you can do for people and there’s lots of problems that they could have solved that maybe you’ll solve for them or not. So, it can be a little bit uncertain. I mean, even if you had pricing tiers and packages, you know on average what your deals are going to be, but not until a later stage we’ll you know which deal this particular client will probably choose.
And so, back to the KPI that we’re looking at, which is total pipeline. As a person managing your sales team, you should really be weighting each part of your sales process with progressively higher percentage chance of winning, assuming that it’s linear and each step actually does represent an increased chance of winning the deal. But, I’m confident that that’s the case. So, what you’ll be left with is maybe a 20% chance of winning in the discovery phase, a 40% chance of winning in the offer stage, and an 80% chance of winning in the contracting stage, something like that.
So, it doesn’t need to be incredibly complicated. You could just use three different weighting criteria. But what this will do is give you a much better sense of your total pipeline, And this is especially important The bigger your sales team is and the more people you manage. It’s the only way you could possibly forecast revenue.
The next KPI I want to cover is closed business by geography, and closed business by seller, and closed business by service line. So what you want to know is where are the sales coming from, who is bringing in the sales, and which things are being sold most effectively. So, an individual probably isn’t going to look at this nearly as much. But if you’re managing a team, you really want to know the answer to this question. Where should you be marketing? Where should you be concentrating your efforts? Who are your top performers and what are they doing that’s different? And which service lines are bringing in the most revenue? And if you can figure it out, ideally, the most profitability. That’s what we really want to get to. So, close deals by geography, seller, and service line. Very, very important.
The next KPI to cover is repeat business. So, I want to know three things about repeat business. The first is, what is my overall percentage of closed business that’s repeat business divided by total business closed? So, pretty simple calculation there. But, what it’s telling me is how important are my existing clients to my bottom line. Spoiler alert, the answer is probably very important, but it is worth it to know, how does that trend and how much should you be investing relatively in your current clients? Usually, the answer is most of it should be invested in current clients.
But, what this is also going to tell you is what additionality we’ll bring you. If, say, 80% of your business is repeat business, then your lifetime value of adding any new client is probably really high. So, you don’t want to look at the cost of your sale or the cost of marketing or acquisition of that client. In terms of the first contract, you’re going to want to look at the long-term opportunity that that client presents.
I’d also look at the total dollar amount of repeat business, which of course you need to know in order to do that percentage calculation in the first place. And I’d also want to know repeat business by seller. Which sellers or which of your consultants are doing the best job of bringing in repeat business and why? So, are those people just better at identifying opportunities that clients mention in normal account management conversations? Are those people proactively making offers that other people aren’t? Are those people just loved so much by their clients that they don’t have to sell anything at all? The clients just come to them with every single problem. What is it about them that’s driving repeat business? So, we want to know that.
So, those are the three big metrics I want to look at with repeat business: dollar amount of repeat business, percentage of repeat business to overall business, and repeat business by seller.
The last thing I want to look at as a sales manager or a business owner, the person who’s overseeing all of the revenue generation efforts, is the source of my sales opportunities. So, are they coming from client conversations? Are they coming from referrals? Are they coming from podcasting? I don’t know. What are you doing that is bringing in sales opportunities? Because that’s going to tell us a few different things.
One thing it will tell us is how successful we are in our different sales and marketing channels that are designed to bring in leads. It’s also going to tell us the relative success and output of different channels. So, some channels are really good at driving awareness, others are really good at nurturing people, and others are really good at bringing on follow-on business. What is responsible for the heavy lifting?
So just to recap, the additional KPIs that I would pay attention to for managers and business owners are total pipeline weighted by stage, business closed by geography, by seller, and by service line. I’d look at repeat business, overall amount, percentage of repeat business and repeat business by seller. And I’d also look at the source of my sales opportunities.
Now, surely, I did not cover every single KPI on earth. I know that is true. If there’s something you wish I would have covered that I didn’t, I want to hear from you. Just go to Liston, L-I-S-T-O-N, .io/podcasts, plural. And if you click on the Modern Sales banner there, you’ll be able to ask me a question on the website. I’d love to hear from you.
I’d also love it if you took a minute or less to review this show on iTunes. Now, all you have to do is go there, leave your honest, candid review, however many stars you want to give it. I don’t care. I just want you to be honest, and I’d love to hear what you think about the show right there in your review. I do read all of those reviews, and your feedback helps me understand how to make the show better.
And finally, I would ask if you’re getting something out of this podcast, just tell someone. Help me spread the word. I thank you for being here. I am so grateful that you have taken the time, yet again, to listen to Modern Sales. My name is Liston, and I hope you have a fantastic day. Bye.