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How will software M&A shape up during the last quarter of 2009?

Activity will definitely pick up Ė but valuations will be lower than usual

Too tough to predict

Activity will slow further

Measure More Than Revenue

By Jerry Sparger, Founder and CEO, Global Business Solutions, LLC

When evaluating sales performance, companies typically measure revenue booked against plan. While revenue results will tell you how well you have done in the last period, they cannot predict how well you will do in the future. Revenue is a trailing indicator, meaning by the time you measure it for a period, it is too late to change it. Even if you are accomplishing all of your sales goals, revenue numbers will not tell you how prepared your organization is to adapt to market or economic changes. If you find yourself behind forecast, relying solely on revenue numbers to evaluate performance, you are forced to take short-term steps to make up lost revenue.

What can you do to more accurately assess sales performance and ensure sales organization agility? Not only measure the past (e.g. booked revenue), but also measure the future. In any business there are leading indicators which, if achieved, yield the desired results. If you measure them correctly and perform to your established goals, you should make your revenue.

Possible Indicators to Measure
Activities to measure and target values will vary by business. Your strategic goals and objectives and processes will help you decide which indicators to measure.

Some indicators to consider for measurement are:
  • Personnel Potential Ė do you have the right people in the right jobs with the right tools to meet your future business needs?
  • Marketing Campaigns Ė is your marketing bringing in the right leads?
  • Process Ė do you have management processes and templates to manage and correct sales activities?
  • Funnel Management Ė do you have a sales funnel with clear rules and metrics for moving sales accurately through your funnel?
  • Corporate Sales Culture Ė does every department in your business help close sales in a measurable way?
Letís examine how measuring these indicators can help you meet or exceed your revenue goals, and avoid surprises.

Personnel Potential
When sales people donít make their numbers it might not be their desire, training or work ethic. A person without the inherent skills to sell cannot become a good sales person no matter how hard they try or how much training they have.

Sales embodies several very different disciplines such as field sales (acquiring new customers), telesales (acquiring customers via inbound and outbound telephone calls), account management (growing existing accounts), or supporting complex sales as part of a team sales approach. Each of these roles is very different, and requires different skills.

How do you measure ability to perform in each of these roles? Statistically validated assessments can measure ability to perform the roles you need to optimize your revenue production. The best of these tools identify attributes top performers share with each other and not with lesser performers, based on thousands of companies and hundreds of thousands of employees. Such tools can also identify areas in need of improvement, resulting in appropriately targeted training.

Marketing Campaigns
Leads that donít fit your target customer profile hurt, rather than help sales, by creating additional work. The number of contacts or the conversion rate to a contact wonít necessarily improve the number of good sales opportunities.

Measuring opportunities that fit salesí target customer profile gets closer to determining if marketing is helping sales. The sales department needs to determine if the contacts fit the profile. If the target customer profile is done correctly, marketing can measure how many good fits were delivered to sales for a given campaign. This can be compared down stream with closes. Sales can set a % of closes against good fits. If marketing delivers the right number of good fits and sales closes their target % of good fits, then revenue goals should be achieved. This makes good fits delivered a valid leading metric.

Measuring processes and associated activities and information flows is difficult, but worthwhile. This will focus your organization on making it as easy as possible for customers to buy from you.

The right processes will align everyone in the company around the customer. Examining how your customers buy, and identifying what activities take place to serve them is a start. How every activity impacts your customers, what information the activity needs and provides to others, when the activity takes place and who is responsible are the key indicators to measure. Each activity and information flow should be traceable to an event that makes it easier for the customer to buy.

One last point about these indicators; you should have a review cycle in place to evaluate how your processes and activities impact customers. Donít be afraid to challenge your processes and correct them.

Funnel Management
A funnel is a valuable tool for forecasting and for resource assignment; it can help you with the next quarter and the next year. Clear rules should be defined for moving into and through the funnel. Create specific hurdles to be cleared for each stage in your funnel, and stick to them. Make them visible, so that managers can see the logic behind every forecast entry. This will help improve forecast accuracy, and allow you to place sales support resources when they are legitimately needed.

Corporate Sales Culture
Measure culture? If your staff takes tea with their pinkie extended, then you have culture! Not that kind of culture. We mean a uniform understanding of each personís role in helping customers buy happy.

Do you have strategic goals and objectives that will help make your customerís lives easier? If so, do these trace to clear objectives for each employee? Are employees empowered to help customers? Do employees understand their role in helping customers? Do employees have incentives to work together to help customers?

Everyone should be motivated to work together. If your processes are clearly measured, you can create an incentive program to ensure that everyone is working to serve the customer and close sales.

It Ainít Easy
These are possible indicators to measure which can improve the likelihood of meeting revenue goals. There are many others. Deciding which ones and what values to measure must be done carefully; it is a challenge for any company.

Jerry R. Sparger is Founder and CEO of Global Business Solutions and has more than 40 years experience creating innovative solutions to business problems. He spent the first 30 years of his career in senior and executive management positions, specializing in new ventures and turning around struggling business units. In 1997, Jerry founded Global Business Solutions Ė a management consultancy that helps companies improve revenue, streamline operations and deliver greater value to their customers. Since founding Global Business Solutions, he has not only led the team in providing valuable solutions for clients, but has also served as chief intellectual architect, creating and perfecting methodologies, authoring numerous articles for national business publications, lecturing and speaking to audiences across the country. For article feedback, contact Jerry at jrsparg@gbsonline.net   

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