How to measure sales skills
As a sales manager and trainer in my previous career I spent a lot of time trying to measure and quantify sales skills. The word trying is telling here, because although we managed to come up with useful tests and training methodologies, there were a significant number of those that failed the tests and did poor in training programs, but closed sales like there was no tomorrow.
I kept looking and the best proxy I have found is sales pipeline metrics. In my experience, which is extensive by some standards, there is no better indication of a sales person’s skills. More specifically I would highlight 4 indicators: pipeline velocity, size of deals, number of deals and conversion.
If you’re just getting started in sales pipeline management, you may want to check out this post about defining the sales cycle for your business before reading on. If you know the basics, here’s how these four metrics help to measure sales skills:
1. Measure how fast deals go through the pipeline
You can measure the average age of deals at each sales stage or the average across the whole length of the sales cycle. Alternatively, you can measure the average time it takes to close a deal. Let’s compare two hypothetical sales people to see why this is useful. If Tim closes deals in 6 weeks on average and Sarah does it in 3 weeks on average, there must be a big difference in their skills or work methods.
Based on these numbers Tim doesn’t have the habit of continuously gaining small agreements (sometimes called mini-closes) during the sales process. Velocity tends to be low (or deal ages high, whichever way to look at it) if you don’t pay attention to signs of danger and don’t clear up potential misunderstandings and are hunting for the “big yes”.
Sarah’s pipeline velocity is a good indicator she uses confirmations like “So if I understand correctly you’re willing to consider our solution if it helps you save more than $5000?” Furthermore, she probably takes matters into her own hands during the sales process, and reguraly checks in to see if another decision has been made by a potential customer.
Pipeline velocity increases with time ie. it’s higher for more experienced sales people. If not, it’s a danger sign. You can get even more specific if you start measuring deal age by each sales stage.
2. Measure the average size of a sale
Like deal velocity, the average size of deals is something that should increase with time, assuming the business you’re in doesn’t have constraints for deal size. Average size is a very good indicator of negotiation skills and confidence. It shows whether someone has the guts to go after the big fish and whether you can identify needs during meetings or calls. If people have some freedom to decide who to contact, average size of the deal shows how well one can choose the right prospects.
Another thing the average size of a deal shows is how good a salesperson is at finding out the real needs of prospects and matching them to more and/or more premium products.
3. Measure the number of deals or leads in the pipeline
It’s useful to measure how many leads/deals someone can add in a time period and what’s the total number of deals in the pipeline. If the number of new deals/leads is smallish it’s a good indicator that either they are not very good at initiating first contact or they simply don’t work hard enough.
Number of deals added shows sales skills as well as work ethic. The number of deals added to a pipeline on a regular basis is, and will be, one of the best indicators of sales success, regardless of intelligence or skills.
4. Measure total win conversion, and conversion by stage
Most managers and sales people measure win ratio, and once again the information is much more useful if you look at it by sales stage. For example if Sarah has a 66% conversion from “First meeting done” to “Proposal made” stage and if it’s 33% for Tim, this may mean one of two things. It’s either that Sarah is much better at turning a prospect’s needs into identifiable “pain” or that she tends to waste time with hopeless cases. Therefore, you should always look at this metric relative to other team members.
This last point applies for all the metrics I’ve described. If you know pipeline velocity, size of deals, number of deals and conversion for each team member and each sales stage, you have a pretty good idea of everyone’s sales skills, at least relative to each other. What’s most important in my opinion is that these numbers can be dramatically improved by small changes all the time, for example, by deciding not to hang on to initially promising leads that have become unresponsive. This change alone can result in better numbers, and there are many more to make.
Please note you don’t need to track every metric at all times – it’s better to pick the metrics that matter the most in your business and focus on those. And sometimes it’s useful to turn these into index-type indicators, for example #Deals x $ Deal size x %Conversion / deal velocity.
In conclusion, in my view pipeline metrics are the best indicators of sales skills. If you’ve come across even better ones, please do add a comment or get in touch.
Image courtesy: michaelaw