Measuring Sales Effectiveness in Startups and Beyond ...

This is a post co-written with Robert David, an experienced Sales executive for whom I have the highest regard. Feel free to contact Robert via LinkedIn or contact me via the email link on my blog home page to discuss this and other sales-related topics.

Not sure who first said, "you can't manage what you don't measure," but in looking at a company's 'sales effectiveness', you'll need to both manage and measure. Applies to a lot of other functions too, of course!

According to Wikipedia, "Sales effectiveness refers to the ability of a company’s sales professionals to “win” at each stage of the customer’s buying process, and ultimately earn the business on the right terms and in the right timeframe." In other words, its a process at which you have to win at each step to ultimately close the deal you want. And as a process, with the tools available today, it lends itself to an array of measurements that can be used to manage it. It's one of the key areas in any startup - the health of the pipeline and the effectiveness of the organization managing it.

Improving sales effectiveness is not just a sales issue - it’s a company-wide issue. It requires deep collaboration between sales and marketing to understand what’s working and not working, and continuous improvement of the knowledge, messages, skills, and strategies that sales people apply as they work sales opportunities. In fact, it extends beyond sales and marketing - particularly in a startup - EVERYONE is in sales and responsible for sales success. Engineering and development is - the product needs to work and solve the customer problem. Customer support is - keeping the customer happy and ready to buy more. Finance, professional services ... all of them!

As a start, here are 3 actions that you can do take immediately to come up with a rough measure of your firm's sales effectiveness:

1. Pipeline movement:

Most high tech organizations have moved away from relatively simplistic Excel-based pipelines to SaaS-based (on-demand) systems like Salesforce or Netsuite with sophisticated analytics and management tools.

Start by looking at your individual sales rep's pipeline, by different sales stage. There are tools to see the 'movement' of deals from the first stages of engagement and qualification through to the final stages of closing the deal.

Create a metric that helps illuminate the positive (or negative) movement in the sales funnel. Rank order your reps and interview your reps that are succeeding in moving their deals along. What is working in terms of their sales development and what can be shared with the rest of your sales team.

On quarter over quarter basis, rate your pipeline movement on a 1 to 10 scale: 1 means 0% deals are not moving forward. 5 means 50% of your deals are moving forward. 10 means 100% of your deals are moving forward.

2. Failure to progress:

It's common to have a win/loss analysis report done quarterly for Executive review. What's less common is to do a 'failure to progress' analysis report by sales stage. Why have deals fallen off the pipeline and what can be done to remedy the situation? Is it a product, channel, or personnel issue that caused a deal to be removed or recycled from sales back to marketing?

As you attempt to maximize your rep's selling time for selling activities, consider using software from Marketo or Eloqua to re-market to accounts that are not ready to buy yet because of budget limitations or other reasons. This is a cumulative measure. Check how many deals failed to progress, the reasons why and how many deals are still in the pipeline. Rate failure to progress on a 1 to 10 scale: 1 means 10% of the deals have fallen off, 5 means 5% and 10 means 1% or less have gone off the pipeline.

3. Quota by sales stage:

Typically, sales quotas are doled out on a yearly basis in terms of product or services with quarterly, sometimes monthly, attainment milestones. But that number is all about 'closed deals/sales' and not about filling each stage of the pipeline with deals.

Unfortunately, in today's uncertain economic climate, management needs better visibility to help steer their team's  daily/weekly sales activities. Most organizations use a 10 to 100% rating for each sales stage. Be sure the definitions for each stage are crystal clear so that everyone in your sales and marketing groups are fully on board and consistent in their use of a each rating mean.

If you have sales teams with responsibilities for particular stages (junior people qualifying opportunities, experienced people closing them), you can assign 'stage quota' to make sure that key actions are getting the proper level of focus. This is going to vary by company and industry. If you have set up 4 'must get done' activities, what percentage of those got done? Give your sales and marketing teams a 1 if they did 10% and up to a 10 if they did 100% of what was assigned.