There was a time when cars didn’t have a fuel gauge. That meant you had to understand the size of your fuel tank, remember when you last bought fuel (and how much) and estimate the distance you’ve travelled since filling up.
None of that is particularly hard, but, depending on your risk appetite, you may be worrying and constantly filling up to ensure you have enough fuel. Of course, you may also get it wrong … and run out of fuel.
Whatever the case, you may feel stress and spend time doing calculations. That takes you away from something else you could do, like focusing on driving, car maintenance or talking with your passengers. I’m grateful we have fuel gauges in cars now!
What is the equivalent of the fuel gauge in your business? Often called Key Performance Indicators (KPI’s), when you glance at the “dashboard of your business”, what do you see? And what don’t you see?
Let’s look at some best practices in KPI monitoring:
- You probably need less than you think
Three or four important indicators can give you a strong sense of what you need to do. You can then drill into challenges and opportunities as you see fit.
- What you measure depends on the goals of your business
If you have a strong orientation to revenue growth, you may want to measure how many leads you’re generating, where they are coming from and your sales conversion rates. You could look at this by product, by region or by sales team member.
If you have a strong profit orientation, you might look carefully at business expenses over time. Rather than measuring the absolute numbers for each expense, consider a category of expenses as a percentage of the total expenses. For example, if your marketing expenses are 10% of total expenses now but they used to be 15% of total expenses, that says you’re spending less on marketing (in relative terms). Perhaps you became more efficient or perhaps you need to spend more? You may want to drill into that question.
Perhaps your goals are around increasing efficiency, in which case you could measure the returns on your resources or assets. For example, in a services business, you might expect each account manager to invoice, say, $300,000 per annum. Some will … and some won’t but having a read on this will be very useful.
- KPI’s are best viewed in the context of time
How does today’s data compare with one month ago or one year ago? Where do you want to be in six months from now? Are you on track to achieve that?
- Set things up properly in the beginning
It used to be extremely difficult to access all the data we want and include it in easy-to-read reports. Thankfully, this has become much easier and many tools exist to help us. But you still have to think carefully about what you want to see and when you want to see it. A lot of time can be wasted due to a lack of preparation in this regard.
- Use meaningful metrics
Make sure the KPI’s are meaningful to as many team members as possible. You want people to be “living the KPI’s“. They should be easily accessible and people should get excited when there are positive developments. If they are seen as “some strange management activity“, it will be difficult to drive them in the right direction.
- Be ready to evolveThe first KPI’s you define might not make sense as the business and market changes. Always challenge whether your approach can be improved.
- Ask what decisions you might make based on the KPI’s
Most importantly perhaps, ask what decisions you might make based on the KPI’s. If revenue is declining but the number of leads is rising, what are you going to do? What about in the opposite case? If you can’t easily answer this, you may have the wrong KPI’s.
Need help building and using a business dashboard? Your accountants are uniquely positioned to help with this so please get in touch.
How to Track Sales Opportunities to Predict New Revenue
If you want to grow your business, attracting new customers is an important strategy. Many will immediately think of marketing and creativity which can put many people off who feel like they are not a creative type. We want to stop you right there, as we believe that successfully bringing new revenue in your business is strongly attributed to a process, rather than creativity.
Imagine you have a potential new customer; you may also call them a prospect. This is someone who has shown interest in your business or the products you sell. In most cases they are gathering information to determine if you have the right solution to fit their needs, and are not ready to buy yet. During that time you may have a conversation or a series of meetings with this prospect.
As time passes, you get busy in the functions of the business and simply forget to continue following up on that new opportunity. At the same time, the prospect has been looking at different solutions that fulfil their needs and without regular engagement with you, has decided to purchase from a competitor. As a result, your prospect never converts into a customer.
What you need to put in place is a sales pipeline.
A System for Sales Success
A sales pipeline is the process into which you funnel your prospects and opportunities, leading towards a sale. Using this process we are able to clearly track every unique opportunity and key information about them including the:
- Organisation or individual you are dealing with
- Products or services they are interested in
- Potential value of each opportunity
- Likelihood of the opportunity turning into a sale
- Team member who ‘owns’ the opportunity
- Next step and the date that will be completed by.
This last step is critical as many people don’t complete this step and fail to proceed the conversation into a sale by not defining the next action for each opportunity. Think about the last time a business or supplier you were talking to promised to send you a proposal or information package by the end of the day. Did you get that proposal?
Those who clearly define what they will do for you by a specific time, and deliver on their promises, tend to stand out. These are the people who persist with their opportunities and turn these relationships into new revenue for the business.
We have the expertise to help you set up a system and the processes you need to track and report on each opportunity. You will be able to better predict the revenue coming into your business, which in turn will improve your planning and resource allocation over the year.
Let’s have a conversation if tracking your sales opportunities to predict new revenue in your business would benefit you. We would love to discuss how we can help turn your prospects into new customers.