Excel Formula To Add Cells And Multiply For A Total How to Create a Sales KPI Model That Really Guides Sales Activity

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How to Create a Sales KPI Model That Really Guides Sales Activity

What is a sales KPI model?

Some sales managers doubt the value of measuring sales success. Measuring at the point of closing a sale is clearly unsatisfactory because selling is not a win-lose game and should be like a game of poker.

Selling is such a dynamic process that success depends on being able to respond to emerging situations before the prospect is lost. A dynamic system should have predictive value to guide sales activity and improve sales performance. Such a system will add value in the form of predictability that enables sales activity to change to improve odds of success.

In summary there are three elements to a truly valuable sales KPI model:

  • Measuring the success of sales activities.
  • Predicting the future value of sales efforts.
  • Guidance for sellers on how to organize their activities.

A model that does this for you enables you to make real gains in improving sales performance:

  • You will be able to guide from a general motivational model to the specific activities needed to advance the sales process.
  • You will be able to see the results in positive changes in the future value of your sales efforts.
  • You will be able to adapt your sales strategy to give you a competitive advantage at critical points in the sales process.

Thinking about the sales process.

With multiple interactions with the prospect, the sale is made at the end of the engagement process with the prospect. These communications can take the form of advertising, email, cold calling or other methods of lead generation, followed by extensive contract negotiations through simple sales presentations. Each of these steps can be considered a go/no-go decision point or milestone in the sales process.

Some of these steps are critical milestones, in which a no-go response stops the sales process. The possibility is lost.

Sales KPIs are measured success rates at each critical milestone in the process. They have a measurable dollar value.

The first step in developing your sales KPI model is to map your sales process.

Thinking about sales forecasting.

The first proposition is that each milestone achieved in the sales process improves the potential for payment banking.

For example, if the customer doesn’t know the price, you can’t get an agreement on the price so the chances of closing the sale are close to zero; Providing a quote is an essential step. How often do your salespeople prepare and submit quotations on time?

Because of this, the value of any prospect at any given moment, the expected value, is the value of the sale x the probability that the sale will close at that point in the sales process.

Your sales forecast is the sum of the expected values ​​of all the prospects in your sales pipeline. There are two ways to increase the value of your sales forecast:

  • Take each prospect to the next step in the sales process.
  • Increase the number of possibilities.

The purpose of a forecasting model is to collect and manage this information.

Should you create your own sales KPI model?

My answer is a resounding yes. Here are the reasons:

  • It should be a source of competitive advantage, in which case you should not use a generic model, or share it with competitors.
  • It must help you manage a different sales process, or help you manage the same process better, to generate a competitive advantage.
  • It should match your business structure, your product or service offering, and your management system.

For example, do you want a built-in sales budget comparison?

Want to build a commission or bonus?

Your decisions about whether and how to link the sales KPI model to the sales forecast model are entirely dependent on your situation. It depends on how you want to work in practice.

I firmly believe that if you can sketch it on paper you can turn it into an Excel workbook, and once you have the Excel model working to your satisfaction, you can decide how to build it into the rest of your management system.

It’s not difficult.

  1. Write your sales process, focusing on milestones along the way to the sale. Estimate the probability of closing a sale after a milestone is achieved.
  2. Estimate the value of the order for each possibility.
  3. Multiply the value by the probability for the milestone position to get the expected value of the probability.
  4. Add the total expected value for each prospect in the pipeline.
  5. That’s your sales report from your salesperson, and the sales forecast for his area.

Of course you can add modifications to this basic process, but those 5 steps are the bare minimum.

The major hurdle is getting salespeople to use the model, but you’ll find that once they get used to the idea, they’ll appreciate the reduction in paperwork and the streamlined sales reporting system it gives them.

Sales managers will appreciate the ability to focus on specific activity goals to guide sales people through the next period. The improved reliability of sales forecasts is a real bonus.

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