My career did not start in the sales field. My first job was as a planning assistant at an engineering company, helping senior experts with the design of plans for big projects.
During this time working with engineering, I had my first contact with KPIs of all kinds. It was an alphabet soup to make any CEO or Startup founder impressed.
Jumping into the future (exactly one year and a half later), while working in sales at a tech company, I noticed a culture where several KPIs were measured, but without a logical explanation. I can even say that are more KPIs being measured in sales than in a large infrastructure project.
However, unlike engineering, I noticed there was no pattern when it came to determining which metrics to measure within business processes. Some companies focused on tracking the volume of activities (number of calls, emails sent, etc) made by the sales team. Others looked a lot at financial indicators such as New Revenues, MRR, ARR, ACV, CAC, LTV, among other acronyms (I'll explain later what each one of them means). It was even rarer to find a business that measured the end-to-end process — from financial numbers to activities made.
For me, a newcomer from a very traditional market with clear KPIs, living that reality was very strange. After all, how can I compare my metrics with other companies (the famous benchmarking) if everyone is measuring something different?
(So far, we've been working on the premise that most companies were able to collect this data regularly, which I found out a short time later was not true.)
How then would it be possible to organize the process and improve the results if there was very little accurate information even to compare your work? More importantly, if most companies track different data, how do you define key business indicators? We'll talk about that in this article.
What are KPIs and why choose them carefully?
Well, let's start from the beginning. Do you know how your sales team is performing? As a sales leader, it is an important part of your job to monitor and measure your team's performance to drive (and prove) success and results for everyone involved.
But not all metrics have the same goals. You need the right KPIs (Key Performance Indicators) to help you achieve your goals.
By correctly selecting these metrics, you will be able to optimize your sales process and ensure that everyone prioritizes the correct activities, thus avoiding communication noise and improperly wasted energy (after all, we all have a limit of demands that we can do per day).
But what KPIs should you track? Below, I'll talk a little bit more about the various tests I've taken throughout my career, and how I discovered the right answers during this journey.
"For every complex problem, there is always a simple, elegant and completely wrong solution."
In my first experience working with sales I had two big missions:
• Structure the commercial intelligence sector that was responsible for generating leads for Outbound prospecting;
• Design the entire sales BI process.
Designing the lead generation process was not so complex, despite the fact that the operation was quite laborious. The company already worked with some people at the time (2014), and LinkedIn was already a reality in Brazil, which was a facilitator.
However, defining what the main KPIs were, kept me awake every night and, like every professional at the beginning of their career in this area, I tried to base myself on the book "Predictable Revenue".
At the time, in Brazil it was practically impossible to find companies that worked with a segmented sales process. Companies that made Outbound based on the pre-sales and sales model (Hunters and Closers), was even more complicated.
Therefore, with no other reference to base on, I defined as the main KPIs a mix that evaluated everything from the number of calls made, emails sent, MQLs, SQLs, to Opportunities and New Customers.
So far, so good. After all, paper and spreadsheet accept it all. In addition, one of the biggest sales references in the world so far (Aaron Ross), already said that it was important to monitor the operational activities performed by the team.
But reality always has a bolder, more time-consuming and more expensive way of showing us wrong.
"The first step towards change is awareness. The second step is acceptance."
Surprisingly (today I actually see it's not that surprising), I saw that the effort indicators didn't show me what I really needed to see.
To give you an idea, in one day, with 10 calls we could get 1 meeting. On other days, with only 3 calls, we converted 2. On other days, we made 50 calls and didn't schedule any meetings!
The same logic applied to emails. Regardless of whether they were customized for the customer or not, the result also varied widely.
Even with the data screaming that something was wrong, I insisted on following the formula I had learned. We set daily goals for the team based on effort metrics and asked for those results every day.
The team also worked with productivity metrics, but in the end, the management process was very much based on the activities performed daily. The result: the volume of calls and emails sent did not impact as much as we imagined in the number of scheduled meetings.
Does this mean that the team should make a low volume of calls, send fewer emails, and do fewer operational activities? Not necessarily. The message that was jumping in our faces was: focus more time on productivity metrics.
If your pre-salesperson (whether SDR or BDR) aims to generate two meetings a day, it doesn't matter if he calls 50x or 10x. However, once you define that he will perform 15 activities a day (since his effort KPIs show that this is the volume needed to schedule meetings), he will tend not to go further if necessary.
At the same time, if he has hit the scheduling goal, he will always feel pressured to do the activities anyway, because he is also forced to do it.
Many people believe that yes: the sales team must perform many operational activities. This explains a little why, even in the US, the sales turnover rate is 34% per year.
This means that if, on average, you hire 10 new salespeople per year, only 7 will remain in your company (remembering that we are talking about the American market).
In the Brazilian market, the situation is even worse, according to a survey by Robert Half. On average, our turnover is twice the world average!
Even though sales are naturally a sector with higher turnover due to constant pressure for results (among other factors), it is not good to lose up to ⅓ of your team per year.
Now, after experiencing these situations on your skin, you thought that my vision had changed. Unfortunately not!
If everyone said that the correct thing was to always track effort indicators and the result generated by the team would be good, why change the approach? I ended up taking over 3 years to learn this lesson, and it turned out to be as painful as possible.
"The moment it hit the jackpot."
In addition to Insight Sales, I was one of the founders of Outbound Marketing & Reev and I can say that it was one of the professional experiences that most defined my career.
In my past companies, I managed to break out of the sales bubble a bit. I worked in the Financial, HR, Consulting Director, and many others sectors. Every business owner ends up doing a little bit of everything.
It was during this period that I also had the pleasure of dealing directly and indirectly with more than 200 commercial operations throughout Brazil and worldwide. Helping to implement these partners' business processes was very enriching. However, there is a big difference between being a consultant and living day to day as a Sales Director.
When I made the exit of these two companies, I went to work at a startup in the healthcare market named CM Tecnologia. In the first 3 months there, we hired several pre-sellers and started scaling the commercial. We established the several calls a day should be made (for those unfamiliar with Outbound in healthcare, emails in 2017 did not have a very high conversion rate).
We also measured the team's productivity, but I can say that the pressure was stronger to reach the number of calls set in the day. Result: we lost more than half of the team in a short period.
It was my fault as a manager, obviously. But how do I ensure that the team achieved the number of scheduled meetings (MQLs) without overcharging activities, while managing my anxiety as a manager? The solution was simpler than I thought.
We continue with our goal of 2 scheduled meetings per day per pre-salesperson. They could achieve this result with 50 activities or 5. It didn't matter anymore!
When hiring, we also began to align the expected results for each new pre-salesperson or salesperson. We set up extremely robust training, followed by very close follow-up in the first few weeks.
After just 3 weeks, the team already had autonomy to decide what volume of activities they would adopt daily to achieve their goals. If they reached the goal with 4 calls, in theory they were already free to do whatever they wanted.
Now, the manager's feeling is that the team will reach the objective and drop the pen, right? Wrong! The daily goal is now the monthly goal broken down by working days.
In practice, we noticed that the team began to seek to generate more schedules even when they hit the daily goal, either to make up for a day when it was not reached or to bring forward the result for the week/month/quarter/semester/year.
As a result, our turnover dropped from approximately from 50% to less than 10%. Interesting, right?
We were able to improve our results, jumping from an average of 10 scheduled meetings per week to more than 40. All of this was achieved with the improvement in team satisfaction.
Do you want to know which productivity KPIs we started to track and which one gave us a complete picture of the process? I'll explain below this alphabet soup I mentioned at the beginning of the article to help you better understand what they are.
Enough of quotes, let's talk about the most important KPIs and data
To have a clear picture of the process, we invested a lot of time determining what was relevant and what was not relevant to be tracked.
We reached the following KPIs:
MRR (Monthly Recurring Revenue)
If your business has a monthly recurring billing model, it's critical to know how much new monthly recurring revenue you've added at the end of each month, quarter, semester, and year.
Example: a product/service sold with a monthly fee of $1,000.00 represents $1,000.00 of MRR.
ARR (Annual Recurring Revenue)
It's the same thing as MRR, but annualized.
Example: If you sold a product with a monthly fee of $1,000.00, it represents $12,000.00 in ARR.
ACV (Annual Contract Value)
This KPI is important for anyone who sells a service or charges for customizations, deployments and integrations. It's basically the total amount you sell on a one-year contract.
Example: if you close a sale with a monthly fee of $1,500.00 and an implementation of $10,000.00, your ACV is the sum of R$1,500.00 x 12 months.
To understand the equation, consider RNR as Non-Recurring Revenue for the first year of the contract.
CAC (Customer Acquisition Cost)
It is how much was spent to acquire a customer. It is basically all the investment made in the marketing and sales team, divided by the total number of closed customers.
We can say that it is one of the most important KPIs in the process, because if you spend a lot to win over your customers and they don't pay you enough, it's not worth selling.
Example: if you spent $10,000/month with your sales team (adding salaries, benefits, commissions, tools, etc.), another $10,000/month on marketing (adding salaries, benefits, commissions, tools, paid media, etc), your total investment is $20,000/month.
If you closed 5 customers in that same specific month, you will divide the total invested by the number of customers gained. This way, your CAC will be $4,000.
If you had sold to 10 customers, for example, your CAC would be $2,000. Did you see the importance of sales in reducing your customer acquisition cost?
(Remember that to calculate CAC, you must choose a time period, which could be a month, a quarter, a week, and so on.)
LTV (Revenue generated by the customer throughout its lifecycle)
LTV stands for Lifetime Value.
LTV can be calculated in a few different ways, which vary depending on your business model.
1. Recurring revenue model: In this scenario, you multiply your average ticket value by the average customer time they stay with your company. If you charge for customizations, integrations, and deployments, these values are also added to reach the final result.
Example: your company's average monthly ticket is $5,000.00 and the average length of stay is 12 months. Then you need to multiply $5,000.00 x 12, reaching the LTV of $60,000.00.
2. One-shot sale: In this scenario, the average ticket tends to be LTV itself.
Example: You sold a service that costs $50,000 in a one-time payment. Therefore, your LTV is $50,000.00.
There are also other ways to calculate LTV. When your company knows the SaaS Net Revenue (SaaS Revenue - Tax), SaaS Gross Margin (Revenue minus Cost of Goods Sold, divided by Revenue) and Churn, you will have a more accurate LTV result.
However, calculating these 3 KPIs above is not so simple and in the end, if you already have a history of your customer's length of stay, the results will be very close and it may not be worth all the effort spent.
This is one of the most important KPIs in the business process. A standard market math is that your LTV needs to be at least 3x bigger than your CAC, for your product/service to be worth marketing.
Remember that your sales need to pay for the entire operation of the company, not just your sales.
Example: My LTV is $30,000.00 and my CAC is $10,000. So my LTV/CAC ratio is 3.
This is a KPI that some professionals don't usually associate with sales. Churn is basically the percentage of customers who have left the company in a given period of time.
So, if a sale was done well and expectations were well aligned with the customer, the probability of the customer canceling the contract is greatly reduced.
Remembering that probability reduction does not mean that customers no longer cancel contracts with your company. We see churn as a sales KPI when after-sales feedback are good, the customer is in good financial health, and is not switching to a competitor .
It is common for a salesperson to excessively pressure a customer to close early, especially at the end of the month. At the same time, selling features that don't exist also impact the customer experience.
In this way, by analyzing this data (along with the others mentioned above), the churn can tell if the sales work was well executed.
You also need to determine a period of time to be analyzed to do this math.
Example: if you had 20 customers at the beginning of the month and 1 left at the end, your churn was 5%.
MQL (Marketing Qualified Leads)
When we talk about the most important KPIs, MQL is one of the most controversial.
Many consider it just the lead generated by the marketing team, typically being the ones they've converted to a funnel-bottom landing page, like the famous "Talk to a Consultant."
In short, it's the lead at the end of the marketing funnel.
This thought makes sense if your company works only with Inbound. However, if your company also works with Outbound or is thinking of implementing this process, it is necessary to increase the scope that the MQL acronym covers.
From my own experience, normally an MQL in Outbound is the lead that was prospected by your pre-salesperson (BDR in Outbound) and agrees to make a meeting with your company.
In addition to accepting the meeting, this lead usually needs to meet several pre-qualification parameters. If you have an Inbound process, it will be easier to collect this information.
It is crucial to look at the criteria that these generated MQLs usually meet, such as the number of employees, revenue, the segment of activity, position in the hierarchy (decision maker), among others, to verify whether the meeting scheduled by Outbound is, in fact, an MQL.
In short, MQL for Outbound is a scheduled meeting as long as it fulfills the same criteria as MQL generated by marketing.
SQL (Sales Qualified Lead)
This is another very controversial KPI in the sales process. For companies that only work with Inbound Sales, it is usually considered a SQL leads that the team is already working on.
However, for those who work with the Outbound process, SQL does not fit this concept very well. Unlike Inbound, where the lead has a greater chance of being at the time of purchase, in Outbound, you will only know this after the first meeting.
Therefore, when the Outbound salesperson takes an MQL generated by pre-sales, it does not automatically become an SQL.
This lead will only be considered a qualified sales lead if it requests a proposal. If your company does not work with proposals and has a pricing page, this would be the moment when the prices would be presented to check if this lead is interested in evolving the negotiation.
For both Outbound and Inbound, Opportunity is the lead that is already at the end of the process.
In these two processes, I consider all leads that are in the forecast as an opportunity.
MQL Conversion Rate → New Customers
This is a KPI that I've seen very few managers use. I confess that I only heard about this metric a short time ago, talking to Bruno Oshiro (Netshow.me Sales Head).
It is very important to keep track of these numbers to understand the productivity and quality of work performed by the sales team.
Example: Imagine two salespeople. Each took 10 MQLs to work with. The first converted 6 into customers the second 3.
We can say that the productivity of the first salesperson was 100% higher compared to the second one, as he converted much more, working with the same amount of leads.
Other conversion rates (SQL → Opportunity, Opportunity → New Customers)
They are also important for measuring at which stage of the process your leads are stagnant.
From SQL to Opportunity, it will show you on average if your team is sending effective proposals that can actually become clients.
"Opportunity for New Customers", if your company does not have clear parameters to define what your forecast is, it will show if your salesperson's feeling is correct.
If it does, it will show you if it's correct or some parameter needs to change.
Effort Kpis - How important is it?
So far, I've talked about the unimportance of effort KPIs in measuring process effectiveness and defining strategies. But is it really advisable never to accompany them?
The answer to this question is not that simple. It will depend a lot on the size of your sales operation, validation of the acquisition channels that your market supports, the manager's confidence level in the team, and also the maturity of your pre-sales and sellers.
Let's work on each of these scenarios?
Size of your business operation
• Large teams (with over 50 salespeople). Itis necessary to track effort KPIs. With a lot of people on the team, and usually with a higher turnover, it is more difficult to create a strong connection with the entire sales team.
But if the team is too big, it's practically impossible. At the same time, for the scaling process, it is necessary to have several well-defined routines so that the team can perform the work with quality.
To track employees one by one is difficult, so effort KPIs will show you how much the team is working.
So, if you are the manager of a large company, always remember to review the effort KPIs to see how the team is doing in terms of activities, but mostly check your employees' results through productivity KPIs.
• Medium teams (between 10 and 50 salespeople). Do not need a very robust monitoring of salespeople.
The size of this team is not very big and, if the structure is organized, it is possible to have a middle management team, made up of coordinators and technical leaders who will individually monitor the productivity KPIs to see if the team's performance is adequate.
By the size of this team, we can infer that the company already has more money to invest in tools and solutions that will facilitate the monitoring of effort KPIs.
• Small teams (less than 10 salespeople). Do not need any tracking of effort KPIs.
A team of this size can easily be matched only by the volume of common KPIs.
Also, putting together a robust and functional effort KPI framework is a lot of work. You need to have a very robust set of tools (I'll indicate some at the end of the text) and enough money to invest, if you want to monitor this data as well.
The investment hardly pays off in this scenario.
Validation of acquisition channels
This is a very common scenario for businesses that are just starting out and, also for bigger ones that only sell through relationships.
When you don't know which channels (such as LinkedIn, Cold Mail, and Cold Call) convert the most, you need to keep a close eye on which ones have generated the best results.
I have always had more success with mixed processes, mixing touchpoints across all these channels. However, my experience in the Enterprise healthcare market has taught me that it is not always possible to use them all.
There, only Cold Call proved to be effective. Cold Mail, regardless of the level of personalization and volume of follow-ups, had bad conversion rates.
At the time, we couldn't find Decision Makers and Influencers on LinkedIn either, because the persona was very offline.
Because of this kind of situation, it is important to check at least at the beginning which channel is most effective.
Manager's level of trust in the team
Well, after starting to focus on the main KPIs for the reasons I've already illustrated here, I also started to establish some agreements with my teams. One is that if the goal was not met by a specific period of time, they would be fired. You need to be transparent with your team about these goals.
Of course, we always performed a qualitative analysis of the work to understand if any factor interfered with the professional's non-ramp. We evaluated the training that was made, compared the result with other people who had joined in the same period (look at the importance of hiring in pairs whenever possible), among other factors to understand if management was also the problem. In cases where there was no failure of the management (of course the management always fails, but we are talking about gross mistakes here), we must fire the professional.
In scenarios where the goal was not met, but there was a delivery of some result, we would follow up to finish ramping up the professional.
Can you see that it's less stressful for all parties to align expectations of the relevant deliverables rather than charging excess operational activities?
I particularly like to maintain a healthy relationship with the teams I manage. I also believe that this humanized relationship helps to improve internal results and culture.
I know that in very large teams it is not that simple to establish these relationships. But in small and medium teams, it's completely achievable.
In summary, it is easier, more practical and more efficient to monitor a pre-salesperson by a scheduled meeting than by the volume of calls made by them. The first is directly linked to the result achieved. The second one, not necessarily (I'll explain this further below).
Team maturity level
Have you ever managed a senior sales team? I confess that I didn't have much experience of hiring sellers with more know-how.
I made it a habit for some time (due to budget constraints, of course) to hire junior salespeople to train them in-home.
At first, I found it easier to train someone in the methods I believed to be the best, than to convince someone with a track record of years of experience to give up a lifetime of work to follow my methodologies.
However, after I took over larger sales operations, I started testing new types of hiring to see what the difference would be in the routine.
I realized that from day 1, there was no need to monitor the results. Professionals with a more senior profile tend to manage their routine better. At the same time, they only need to be trained in the company's internal process.
Everything else he or she will do, without the need for micromanagement. We don't need to remind them, for example, that follow-up helps to increase conversion rates.
He tracks his MQLs, SQLs, and Opportunities closely as he knows that if he dozes off, he will have fewer hot leads to work with.
With senior teams, it makes less sense to track effort metrics as they naturally already tend to look for the most converting channels on their own and do the activities in a way that maximizes conversion rates. Also, they see the importance of daily activities that will yield results shortly.
For less mature teams, it becomes more necessary to follow the effort metrics and activities a little more to ensure that they will execute the process correctly and mainly to see the importance of follow-ups and other factors.
Why, after all, do managers still focus on effort metrics (and why don't they have a strong correlation with high performance)?
Anyone who has worked in sales for a long time already knows this clearly. But why do many managers still demand a high volume of activities from the commercial team, regardless of the team's maturity?
More important than simply understanding how this practice is perpetuated, is understanding why it exists.
We know that the more robust use of CRMs for business management is relatively recent. Thus, monitoring and defining productivity indicators in a simple way was not such an easy job.
Have you ever wondered what it's like to follow a sales funnel without a tool to support you? It's not such a trivial thing.
So what were the simplest KPIs for sales managers to track? If you thought about effort KPIs your answer is correct!
In a face-to-face work context, it is very simple to keep track of whether or not your team is making calls and sending out emails. With the automation tools that emerged, it became even simpler to do this job of measuring the team's daily activities.
However, measuring these activities can be a problem. They don't determine the success of your process in the same way that the most important KPIs do.
You can make 10 calls in one day and convert in one meeting. Maybe the next day you won't convert to any meeting. On another day, it could be that those same 10 calls convert to 3 meetings. Taking the average of activities, we have 1.5 meetings scheduled for every 10 calls made, thus generating a 15% conversion rate between contacts made and meetings scheduled.
Does this number make sense to you? If you ask a sales manager, he will probably say yes. Asking a salesperson he or she will likely say no. Why then this divergence between answers?
We have some explanations for this phenomenon:
1. It's not very common to find sales professionals who register every call they make, or emails sent, etc. Even with VoIP tools or email automation, at some point the salesperson ends up contacting the lead by means that are not always so conventional (using their own cell phone, WhatsApp, Facebook Messenger, LinkedIn Chat, among others);
2. Anyone who has worked with prospecting knows that the success rate of activities varies a lot over the days. I've worked with salespeople that in a few days converted 2 meetings with 10 calls and the next day, doing the same thing, needed more than 60.
Even if you do a more robust statistical analysis and find your success rate is 15% between activities and scheduled meetings, try making 20 calls a day and see if you'll schedule 3 meetings/day.
This is because, unlike post-meeting moments where we have already established a relationship with the lead, we have little or no knowledge of his routine.
Once the relationship is established, it becomes easier to establish a follow-up routine and the success rate of the activities increases significantly.
In short, effort metrics are an excellent guide to directing your team's work. But the goals should not be guided by them.
Establishing goals of MQLs, SQLs, Opportunities, New Revenues, among other productivity indicators make more sense because they are easier to control.
If you need to schedule two meetings/day, it doesn't matter how many activities you do. It could be 10 or 100. In the end, what matters is to schedule them (obviously, the higher the quality of the contact, the more likely it is to convert more with less effort).
How to track KPIs?
There are several ways to track your KPIs. You can make integrations between your CRM and solutions like Power BI, Google Data Studio, etc.
You can even use Zapier to connect your CRM with a spreadsheet where data will be processed, and then connect this spreadsheet to a business reporting tool.
However, all these ways of measuring generate a relatively high maintenance work. It is always necessary to check if the information is being passed correctly from one tool to another.
At the same time, errors in filling out the CRM are very common on the part of the sales team. This unfortunately ends up having a big impact on the quality of the information that is generated. It is very common, for example, after a few months for a company to discover that the KPIs being generated are incorrect.
Tools such as Insight Sales will do all this work for you, already anticipating the most common mistakes in CRM management to ensure the integrity of your analyzes and make data easier to read. The objective is to simplify the reading of your most important KPIs and optimize your daily routine, thus facilitating this measurement.
The important thing is that you keep in mind that your role as a manager needs to be more strategic, and KPIs exist precisely so that you can make a more objective and accurate reading of your results. In this way, your decision-making will be more relevant and the growth of your numbers, even more promising.