If you want a successful, happy, over-achieving sales team, these 4 KPI's hold each rep accountable and will produce in-quarter results. We've also created a cheat sheet you can download and share with your team.
If you want to go one step further, OneShot’s machine learning-powered platform instantly boosts qualified sales pipeline and does the heavy lifting - so your sales reps don’t have to.
1. Pipeline Coverage
A rule of thumb is that a healthy pipeline should have between 3x - 5x pipeline coverage. First, lets breakdown how to calculate pipeline coverage.
Pipeline Coverage = Total Pipeline Value divided by Quota
Quota - The sales reps annual, quarterly or monthly target
Total Pipeline Value - The total of all opportunities annually, quarterly or monthly
E.g. Sarah is a rep with a $1m annual quota with a $2.5m total pipeline, $2.5m / $1m = 2.5.
Sarah has 2.5x pipeline coverage. From this example, Sarah is at least $500k short on her pipeline.
You should work out your team's ideal pipeline coverage by using your close ratio. So the magic 3x pipeline multiplier comes from a company winning 1 in 3 of all opportunities, this might be higher or lower for your business.
Validate Pipeline Coverage by Number of Deals
Pipeline coverage can be easily skewed by outliers so I recommend validating your pipeline coverage by looking also on the number of deals. For example, it might be the case that a rep has one large opportunity forecast for the end of the year, this could give the rep a 4-5x coverage, but if you removed that one opportunity their pipeline could be less than 2x coverage. As we’ve also seen before, relying too heavily on one big deal is a dangerous game.
So now let’s put aside the total $ value and instead look at the total number of units. We work this out slightly differently, firstly we have to work out how many deals a rep should be closing a year based on average deal size.
Let’s say your average deal size is $50k and our rep Sarah has an annual quota of $1m, that means Sarah needs to close 20 deals to hit quota. $1m / $50k = 20
This means to have 3x pipeline coverage they should have 60 deals in their annual pipeline, or 15 per quarter.
It’s important to look at both metrics, Total $ value and Number of deals. A healthy pipeline will have a minimum of 3x in total size, plus enough deals in play that if one falls out they have more in play.
2. Opportunity Age
We’ve now established if a rep has enough coverage to hit number but we now need to dig a bit deeper into the quality side of things. For starts, you’ll want to check the opportunity age. This is an absolute key metric to keep an eye on. What’s the age of each opportunity? If your organization has an average sales cycle of 90 days for example, and your reps deals are above 180 days, the chances are these deals won’t close and there are fundamental qualification issues.
A determined rep may not like closing an opportunity because they don’t want to give up on it, or it makes their pipeline coverage look bad, so you will need to challenge them on this. There should be a good mix of deal ages, from mature to new, if there isn't a balance the rep will fail, unless they are relying on getting lucky on 1 or 2 deals.
3. Number of meetings
We've now really tested the legitimacy of our reps pipeline. Once you go through a full pipeline inspection the reality in most cases won’t be great. Most reps won’t have the coverage. If they do, great, their time should be focused on solid close plans and continuing what they are doing. But it’s no surprise that it’s the reps with poor pipeline that will go on to miss number. The reality of what landed them there is a lack of pipeline generating activities.
The best metric to look at is number of Net New Meetings per week / month / quarter. By rule of thumb, a successful rep should be conducting 3-5 meetings per week.
The best performing reps in any business will be the ones who are in front of customers the most. If meeting numbers are below average it’s important to understand what activity is being done to generate meetings. It’s easy for any sales leader to say “you need more meetings” but it’s important the leader and their team have a clear plan on how to achieve these meetings on a weekly basis.
4. Net New Contacts
Once we really get down to the daily cadence activity that dictates success or failure, we really need to focus on the daily cadence of a salesperson, how many new people are they contacting on a daily/ weekly basis.
First, you’ll want to calculate the average number of new contacts to get a response, and then how many responses to get a meeting.
Cold prospecting is tough, but with focused, value-based targeted messaging a good rep will see that they will get a 20% response rate, so for every 5 people they contact 1 will respond, then out of those 5 responses, 35% go onto a valid first meeting. That’s 2 meetings per week.
We typically see if a rep contacts 20 new people per day they on average book 2 net new meetings per week, that’s 8 a month, 96 in a year, this has a huge impact on pipeline and closed revenue.
We live in a data-driven world but KPI’s can become a bit overwhelming, and setting up the incorrect KPI’s can lead to incorrect behaviour. A popular activity metric I often see reported against is cadence or the number of emails sent. In reality, this can lead to sales reps spamming prospects to keep activity high, resulting in annoying prospects and irreversible brand damage.
Get in touch to find out how we can help you build a productive, quota-exceeding sales team.