Sales
Sales is typically strongly driven by key figures, as sales staff are often remunerated based on performance.
It is important to note that these performance-driven metrics are by nature lagging, i.e. backward-looking. In addition, these metrics are often based on individual performance, and not on the performance of a team.
We recommend to focus on metrics that either illuminate the efficiency of the sales process, or are helpful as a forward-looking indicator for capacity planning.
Sales Cycle Length
A sales cycle measures the time between the first contact with a lead to closing the deal.
Or, formally:
Where:
- \(\Delta T^{SC}\) : the length of one sales cycle
The aim should be to reduce the sales cycle in order to reduce sales costs, risk, and increase plannability.
The sales cycle is typically expressed in days or months.
KPI: Sales Cycle Lenght
KPQ: How long does it take for a customer to sign?
Type: Average
Frequency: Depending on how long the sales cycle is. If you are active in the B2B sector and have long cycles of months to years, then it makes no sense to measure this KPI on a monthly basis. However, if you are in the online business and have a cycle of a few days, then this KPI can be a helpful, fast-changing early indicator of market changes.
Scale: \(0 < \text{Sales Cycle} < \infty\)
Reference Value: Depending on industry. Industries with a personnel expense ratio greater than 50% are considered personnel-intensive. Larger companies typically have a lower personnel expense ratio. Typical values per sector are (although there are also considerable differences within the sectors):
- Wholesale: 6%
- Retail trade: 11%
- Construction: 25%
- Production: 30%
- Craft: 35%
- Consulting: 65%