Sales metrics and data analytics can be your best friend or worst enemy. Most sales organizations pride themselves on making data-driven decisions. With the exception of a few high-performers, sales teams struggle mightily to leverage data. Ask anyone in your finance department how much weight they put in the accuracy of a sales leader’s forecast? They will share how they apply their own adjustments to the analysis to account for overconfidence. If sales data analysis is inaccurate, who is the culprit? The answer is “false indicators” or metrics that lie.
Opportunity Conversion Rate
In terms of data hygiene, opportunity conversion rate should be one of the most accurate data points. Salespeople struggle to enter their meeting notes, add all of the account contacts and update their close dates, but opportunity close/won data should be accurate because it gets them paid. False. Unfortunately, the root cause of data inaccuracy for opportunity conversion rate comes back to the question, “Was this a qualified opportunity?” Fast-growing companies are constantly changing their opportunity criteria and resourceful salespeople know how to “pad” their pipeline with unqualified opportunities. The variance dissolves any data integrity for this metric. So, the next time your VP is boasting about your unusually high conversion rate, do some digging.
Daily Activity Metrics
This might be the most obvious false indicator. Activity does not equal opportunity. Everyone knows the salesperson stereotype, the “busy bee”. They’re first in, last out. All of their records are updated and they’re prepared for every meeting. Yet, their pipeline is always the weakest. Despite their “numbers” looking great from an activity standpoint, they just don’t seem to convert that into qualified pipeline. Again, dig a little deeper into their daily activities. Are they being strategic? Do they think about who they are contacting and when? And with what reason? Top performing salespeople are oftentimes quite lazy. Their lack of work ethic can actually be an enabler as they carefully consider every action they take. “Will this make me money?” This is the question top-performing salespeople ask themselves. If it won’t, they don’t do it. Beware the false activity metrics that make poor-performing salespeople feel good.
When you’re at a fast-growing technology company, “you’re building the car while driving down the road.” Yes, forecasting growth is critical. It allows your team to plan and hire accordingly to support your accounts. With that said, it’s wildly inaccurate because no one at the company can predict the future. The best thing you can do is train your salespeople to ask the hard questions as part of their qualification process or better yet, put it in your contracts. If your client has to review a “forecasted growth” section of the agreement before signing on the dotted line, you’ll get some real answers. Again, you’ll never know the truth. If you do, you’re in the wrong business. You should be a VC or playing the lotto. The best way to deal with this metric is to apply a healthy variant. We’ll plan for “best case” and assume “worst case”.
Sales data should be the best data. It’s perhaps the most binary part of any business. You either win or lose the deal. Unfortunately, salespeople are human beings and humans are flawed. We sometimes don’t see the truth. The “best case scenario” is sometimes so enticing, we treat it as reality.