Key performance indicators to start a real "Sales Ops" strategy - Part 2
As we have seen in our first part, measuring your results with the mains KPIs used by Sales Ops can allow a complete optimization of your entire sales process.
If you are not up to date on what “Sales Ops” are or on part 1 of this article, we advise you to start reading: “Sales operations, the new essential ally to boost your revenue figure and your teams” before starting with the first part of “key performance indicators to start a real “Sales Ops” strategy“.
A few weeks ago, we were asking ourselves :
- How could leaders know if their sales teams were functioning properly?
- How could they evaluate them?
And we gave you the beginning by telling you the first 2 categories (out of 5) of KPIs to measure to start your Sales Ops strategy. These KPIs were about :
- Your CRM, which hides essential KPIs
- Your Sales Funnels and its possible optimizations
We will therefore address the following 3 :
- The procedural metrics,
- The sales resources KPIs,
- The financials KPIs
1/ The Procedural Metrics
In the context of sales operations, process metrics are measures that assess the effectiveness and efficiency of your sales process or a specific step in that process. The KPIs in this section serve as benchmarks to indicate which processes need to be optimized, improved, or abandoned. By regularly evaluating these metrics, you can identify bottlenecks and inefficiencies in your sales process, and then implement improvements to enhance their effectiveness and profitability.
Your sales teams may sometimes use different processes (and this is especially true in converting and printing carton packaging). So it makes sense to choose the right KPIs for each specific process the team uses.
Sales Cycle Length…
The sales cycle length (or duration) indicates how long it takes – on average – to go through all the stages of the sales cycle. These steps can include :
- Data enrichment
- Prospect outreach
- Lead nurturing
- Sales calls, video calls, and meetings with the prospect/customer
- Deal closing
Or even more, but it is often possible to streamline your sales cycle by reducing the total number of actions.
If you want to reduce the length of your sales cycle, it can also be interesting to track the number of touchpoints your sales teams typically have with a prospect before they set up an appointment.
With HIPE, you can measure the duration of your sales cycle simply because you have access to:
- The opening date of the project,
- The dates of sales tasks (calls, prospect/client emails),
- The dates of information collection and configuration,
- The date when the order was placed (Project won and/or Configuration won),
- The date when the order was placed in “Production”.
If you have a marketing team, you can even analyze the marketing actions directed by customers (newsletter, trade shows, acquisition via the website) and obtain complementary information to those of the sales action.
Ultimately, the analysis of the sales cycle time is measured by these key steps for you:
- The acquisition/identification of prospects – customers,
- The opening of a customer account,
- The opening of a project,
- The opening of a first collection/configuration,
- The time of exchanges: models, reconfigurations,
- The placing of an order,
- The validation of the final elements, in particular graphics (Ready For Press),
- The passage in production.
Lead Generation Ratio (Marketing VS Sales)
It is relevant to know the lead generation ratio because it tells you where they come from. Is it because of your marketing actions (a trade show for example) or because of the sales team?
B2C companies rely primarily on marketing to generate a higher percentage of leads.
B2B companies, on the other hand, often find it useful to invest in sales leads and don’t always have a marketing team (which is probably the case for you).
In B2B, it is better that your marketing team focus on your brand identity and make it easier to find (especially in SEO and keyword buying).
This is especially true in our industry… That said, you need to know what is the right acquisition strategy to implement for industrial B2B: you need to know how many leads are coming in and through which channel.
With HIPE, you can know:
Which configurations/projects have been created by your prospects and customers who have never been “onboarded” by your salespeople:
- Indeed, you need to distinguish your prospects/customers who have not talked with a salesperson to place an order or simply initiated a first request (first configuration) from customers/prospects who have been brought on HIPE by your salespeople.
- The percentage of inbound leads by your marketing efforts is therefore the projects/configurations created by autonomous customers/prospects on HIPE (first request, subsequent projects after the first request)
All other Projects (and configurations) associated with them correspond to your percentage of inbound leads from your sales team.
With this indicator, you can measure the ROI (return on investment) of each acquisition channel (marketing or sales).
From there, you can:
- Boost the ROI of each channel, like choosing, with the right information, to invest differently in them.
- Re-measure how your actions, new tools, and processes have helped you achieve your strategic objectives and do it again.
Lead Response Time : a problem ?
We’re talking about how long it takes for one of your salespeople to respond to an identified prospect.
Identified prospects are those who accept sales solicitations by downloading white papers, signing up for newsletters, or taking surveys on landing pages.
Noting this response time can help determine which segments of the sales cycle take the longest. It can also show you where in the sales cycle time investments are most profitable.
In particular, your teams’ response time to leads and customers is a common pain point in the packaging industry.
HIPE is a powerful generator of (highly) qualified leads when connected to a website. As soon as your prospects and customers use it independently, how long does it take you on average to receive and process a new request?
With HIPE, from the creation of an incoming request by a prospect or customer to its handling by the sales representative, it is relatively easy to measure the time spent.
We think it is particularly interesting to analyze this indicator with your conversion rate. You should find that a low lead response time is correlated with a higher conversion rate.
Other “response times” can be measured when you go down the funnel of a packaging manufacturer:
- Feasibility study and/or quotation time,
- Model management time: from the initial request to production, shipping, delivery to the customer, follow-up by the sales representative, and customer feedback (positive or not),
- The time to manage the production: after the agreement of the estimate, finalization of the elements, especially the graphic ones, to launch the production.
When HIPE produces quotations in real-time, it also participates in the reduction of the ” quote response time “ which seems to us to be a real pain point for the customers of our industry.
Be precise about your sales forecasts (Sales Forecast Accuracy)
The sales forecast allows you to see the big-picture metric. It tells you how close a sales manager’s projections are to the exact sales numbers after the fact. The best sales forecasts take into account both internal and market data.
Accurate sales forecasts are necessary to make effective downstream decisions. Analytical software, accurate input data, and rationality can all improve sales forecast accuracy.
The Pipeline Forecast KPI itself should be measured against the accuracy that can be expected.
For example, by comparing initial and actual forecasts on a quarter-by-quarter basis, you can identify the biases and factors that generate the largest variances.
By eliminating them, you can improve your future visibility into your business and make better decisions.
With HIPE, we explained how to generate the pipeline forecast.
You can of course consolidate the orders by a quarter by filtering your “ordered” configurations over the chosen period.
All you have to do is keep this analysis up to date and measure the variances.
2/ Sales Resource KPIs
KPIs allow operations managers to evaluate a sales team from a more personal perspective. Human resources is a key partner in these assessments.
Poor sales resource performance (as indicated by these KPIs) tells the company that it needs to rethink its approach to recruiting, training and, incentivizing sales reps.
Sales efficiency indicates how much revenue a sales team generates per dollar invested.
To determine sales efficiency, all selling expenses for a given quarter must be added together. These include:
- Wages or salaries,
- Compensation and bonuses,
- Sales team travel expenses,
- Sales management software (and other tools),
- Sales-related marketing expenses
Then, add up the total revenue generated by the sales team in that quarter. Finally, take the sum of the revenue and divide it by the sum of the expenses.
Sales Efficiency = (Generated revenues) ÷ (Total expenses)
This number tells you the return on investment of the sales team per euro and per quarter.
In our custom B2B industry (converters, cartoners, etc.), where the sales effort often (if not always) exceeds the marketing effort by far, it is crucial to track this indicator.
For a cardboard company, we consider it essential to extend the evaluation of expenses to all the teams linked to sales, on the part of the time of these teams dedicated to the commercial effort for the placing of orders, i.e:
- Sales administration
- The Design Office
Of course, it is likely that these “sales support” teams spend a significant part of their time structuring production methods and supporting the production effort: therefore, only count the expenses in proportion to the time spent managing customer/prospect requests, creating files, making estimates, studies, mock-ups…
All the more so as soon as you put in place good Sales Ops practices because this indicator will also allow you to measure the ROI of your Sales Ops.
For example, imagine instead:
- Your quarterly revenue is 3 million euros.
- Your “sales” expenses for the quarter amount to €300,000. To which you should add the pro rata of the “support” teams: €300,000 again.
- Your sales efficiency ratio is therefore 5 euros of turnover for each euro invested in your sales effort.
Follow this indicator every quarter, and measure its evolution compared to the previous year to understand the seasonality. With the good practices of the Sales Ops concept, you should significantly improve this indicator.
Sales Agent Turnover Rate
Employee turnover is a growing reality in the world today. Research organization Gartner predicts that total annual employee turnover will be 20% higher this year than last.
And that applies to all industries…
Employee turnover can be expensive. Every time a sales representative leaves, the company must spend time and money hiring and training a replacement.
This is especially true for a carton converter and more generally for packaging manufacturers. A salesperson must:
- Be a “good” salesperson,
- Have fairly advanced technical knowledge of packaging,
- Understand the marketing & supply chain issues of his customers,
- Be comfortable with complex sales and long processes to close a custom packaging sale
The alternative would be to shift the workload of this employee to other sales agents. But that may result in even more turnover in the long run.
To calculate your sales agent turnover rate:
Turnover rate = (Number of departures ÷ Total number of agents) x 100
As with the previous indicator, we recommend extending this analysis to the “sales support” functions.
Imagine that your team consists of 6 salespeople, 3 sales administrators, 2 currency traders, and 2 design engineers in 2022. That’s 13 people.
In 2023, a junior salesman joins the team but another salesman retires and 1 designer resigns. Your turnover rate is therefore 2/(13+1) = 14%.
Note: we believe that this indicator only makes sense for very large companies with sales teams of more than 50 people. Below this level, “exceptional” elements such as retirement may confuse the analysis of this indicator.
- For SMIs (Small and Medium Industries), measuring the level of team satisfaction via internal surveys or via the rate of sick leave over the number of days worked seems more relevant.
- As we explained in our first article “Sales operations, this new ally to boost your numbers and your teams“, Sales Ops improve the satisfaction of “internal customers”. These satisfaction indicators must therefore mechanically progress in line with your strategy alignment process with your human resources, your data, your processes and your tools!
3/ Financial KPIs
Financial KPIs are about the impact of the sales team on the bottom line. They show the sales manager how his or her salespeople are closing deals and how much they are worth. These indicators are very concrete!
Customer Lifetime Value
This indicator shows the average profit generated by a customer, not on a single transaction, but throughout his relationship with the company, from his first order to the end of the collaboration.
Customers with a higher budget or greater brand loyalty have a higher CLV.
To determine CLV:
- Measure your retention rate: this is the pro-rata of customers who order from you from one period to the next,
- Determine the “lifetime” of your customers,
- Identify the average basket and the frequency of purchase of your customers
Finally, the CLV is :
CLV = (Average basket x Purchase frequency) x Customer lifetime
Let’s take an example with HIPE by crossing your Companies and Projects information:
You can determine when the customer placed his first order and when he placed his last order, before leaving you: because he found another packaging supplier because he filed for bankruptcy, or any other reason.
In the example below, by cross-referencing your “Configurations” and “Projects” information, you determine that this customer brought you 17 000€ between December 07, 2021, and January 10, 2023, dates at which you know he will no longer recommend you – that is to say 14 months of activity.
The CVV (Customer Lifetime Value) of this customer is therefore 17000€ and the monthly CVV is 1214€.
By exporting your complete data, and analyzing the “lost” customers, you can get this figure averaged across all your customers and classify your customers:
The strategic ones (above the CVV or monthly CVV)
Typical customers (in average)
Non-strategic customers (below the VVC)
And provide a very different analysis, strategy, and actions according to this reading grid…
Customer Churn Rate
This is the percentage of customers who leave the service you offer after a given period. This period can be monthly, quarterly, or annually. A low churn rate indicates that you are retaining more customers, while a high churn rate is not a good sign because it means you are losing revenue by not generating quality leads.
Churn rate = (Number of customer unsubscribes ÷ Total number of customers) x 100
Again, with HIPE, and using the same data export as for the previous analysis, you can determine each year: what is your active customer base (for example, customers who have placed at least 1 order) and what are the active customers of the previous year.
Let’s say you have 750 active customers in 2022 and 120 active customers in 2021 are not active in 2022. This gives a churn rate of 16%.
The objective, once this data has been structured and analyzed, is to lower this rate, which will mean increased customer loyalty.
To do this, you will need to call on your sales team to analyze each customer case, provide a qualitative response, and then structure the cases that explain the attrition:
- A bankruptcy filing,
- An internal desire to stop working with the customer (bad payer, a non-strategic customer who asks for a lot of studies and estimates and who orders little or not at all),
- Loss vs. competition due to poor quality of service,
- Loss vs. competition because of bad price positioning
- Loss vs. competition because of not respecting production deadlines,
Loss vs. competition because of non-respect of manufacturing problems,
From then on, you will have visibility on the actions to take, the tools and processes to put in place to deal with each case.
- Internal will to stop working with the customer: bad payer. In this case, you can better analyze customer information before listing them, and ask for down payments or payments on order from certain financial thresholds
- Loss vs. competition due to poor service quality (response time). In this case, analyze and understand the steps that take too much time internally, streamline the information (from request to response), bring a tool and processes that reduce response times by reducing the team’s load (HIPE for example).
Customer Acquisition Cost
Customer acquisition cost (CAC) tells you the average amount your company spends to acquire a new customer. It starts with the sum of several costs over in a given time period, including:
The costs of marketing and advertising campaigns,
CRM, website, E-Commerce, or HIPE tool costs
Salaries and overhead of the extended sales team (*)
Salaries and overheads of the marketing team
(*): including the relevant ratio of the Sales Administration, Cost Estimation, and Department teams when they contribute to the acquisition of a new customer.
Once you have this amount, divide it by the number of new customers acquired in that period.
CAC = (Total costs to acquire a new customer ÷ Number of acquired customers)
NOTE: A subset of the cost of customer acquisition is the cost per lead (CPL).
Let’s take the example of the KPI “Sales Agent Turnover Rate”. Your team consists of: 6 sales agents, 3 sales administrators, 2 currency traders, 2 design engineers, and 1 marketing manager in 2022.
By valuing the salaries and associated costs of the sales and marketing team, plus the share of the salaries of the other people in proportion to the time spent on the sales effort to acquire a new customer, you obtain an expense of 300 000€ over the year.
Over the year, you have gained 450 new customers.
Your Customer Acquisition Cost is therefore $6,666 per customer.
High or not? Only the analysis of this indicator in connection with the VCA indicator can help you answer this question.
You must therefore calculate your VVC/CAC ratio because it presents the sustainability of your business while indicating whether your acquisition costs to convert your new customers are too high.
Some market indicators:
A 1:1 ratio indicates that you spend as much to acquire a new customer as they bring in over their life cycle with you. The more you invest in new customer acquisition, the more money you lose.
A 3:1 ratio probably shows strong growth in your business.
A 4:1 ratio shows an excellent business model.
Customer Management Cost
This indicator is also for us a relevant tool for financial analysis regarding your sales performance because it is not limited to the cost of acquisition. It includes all your marketing and sales expenses, including those of the support teams (sales administration, quotations, BE).
Let’s start with the previous example. Your team is composed of: 6 sales people, 3 sales administrators, 2 currency traders, 2 design engineers, and 1 marketing manager in 2022.
If we value the salaries and associated costs of the sales and marketing team, plus the share of the salaries of the other people in proportion to the time spent on the complete sales effort this time, you spend €1,000,000 over the year.
You have 750 active customers, including those acquired during the year.
The CMC is therefore 1333€.
By taking out the part of the expenses linked to the pure acquisition, you can then check what a loyal customer really costs you.
If you take out the 45 new customers, you have 705 active customers for whom you have spent $700,000 over the year. This loyal customer base has a CMC of 992€, which is almost 7 times less than the acquisition of a new customer.
It is clearly more profitable in this example to retain your customers than to go out and get new ones.
In any case, you need to acquire more new customers than you lose (attrition) to guarantee your business development, at constant VVC.
Streamlining sales operations with HIPE will not only save you time but also improve your KPIs.
It’s a very powerful tool, implemented as part of the 5 pillars of your business: strategy, people, data, processes, and tools.
By the way:
HIPE vs strategy: a customizable tool to serve your strategy > modules according to strategy (E-Commerce, CollectOfNeeds to accelerate and improve studies, intranet with prices for salespeople etc),
HIPE vs people: designed for trade and trade flow management – main users of the solution in fine,
HIPE vs datas: HIPE collects millions of structured data that must be analyzed and followed,
HIPE vs process: HIPE must be thought in relation with your processes. It can comply with them as well as challenge them to better serve your strategy,
HIPE vs tools: HIPE is a tool. And only a tool. It can only serve you if it is implemented in phases with the other 4 pillars.
Sales operations are complex. But they don’t have to be overwhelming.
Track your progress with a wide range of sales operations KPIs with HIPE: Improve, strengthen, and optimize your sales approach.
Want to know what HIPE can do for you? Contact our experts today.
Did you like this article? Want to know more?
Join us on Tuesday, March 07 at 5:00 pm for our webinar “Sales Ops: Boost your sales strategy” with our two exceptional guests:
Rogelio Cárdenas Arriola, Revenue Operations Manager at Splio
Lyes Boukeroui, Head of Sales Operations at Uptoo
Two specialists of the subject, working in hypergrowth companies in which they were able to have a real impact. We are convinced that their valuable advice will be more than useful to you and that their ultra-optimized sales methodologies will give you a definite competitive advantage if you decide to apply them in your company.
We try to bring original and relevant content to our industry every month, and your presence at this webinar is very important to us: