While working on the content for our firm’s upcoming presentation on benchmarking and key performance indicators, I’ve been focusing on measuring what matters to businesses and how they can measure for the best results.  It occurs to me that many business owners and business managers may not know what really matters.  Many business owners know that they need more sales, better cash flow and higher profits, but they don’t know what drives those results or necessarily the quickest path to get there.  My assessment is that you need to know what matters in order to achieve you goals timely.

Your sales typically come from two areas:  (1) existing customers, and (2) new customers. Looking first at existing customers, do you:

  • know how many of your customers are repeat;
  • know how often they purchase;
  • know the average size of their orders;
  • have any competition for their ongoing orders;
  • know if your sales team is in regular contact with these customers;
  • know which customers are the most profitable for your business;
  • have a method to measure their satisfaction with your products or services?

There are many more questions that we can add to this list, but you get the point…. why do these customers continue to come back, how well are we performing, and what is the competitive landscape?  Once we know what matters, we can measure it.

Reviewing new customers can be a completely different process.  Where does the sales cycle start?  Many sales-focused organizations or departments use some type of CRM (Customer Relationship Management) system that has a pipeline or a funnel.  My interpretation of a pipeline:  everything that goes into the pipeline comes out the other end.  My interpretation of a funnel:  everything that is deposited into the top of the funnel comes out the bottom of the funnel, only faster and with more force.  The last time that I tried to use this analogy in a sales setting it meant every prospect we talked to came out the other side as a sale……hmmmmm!  Not quite the way it works.  What we really have is an inventory of prospects that may come to fruition or not.  This is more like a sieve, or a series of sieves.  Every time your prospects go through the sieve, some will make it to the next step and some won’t.  This is exactly what happens in the sales cycle:

  1. You start with suspects (those who you think may be interested in your offering)
  2. Your team speaks with them and they may end up a prospect (actually interested)
  3. Once a prospect, you can decide how interested they are and follow up with a proposal if appropriate
  4. Prospect enters into final decision-making process until they become a customer.

Every business has a different process and a different time line.  It may take ten minutes or ten months to go through this process depending on what you are selling and to whom.  What is important from a management standpoint is to know how many sieves you have in your process, which sieves sift out the most possible customers (and why), and, most importantly, what your conversion rate is from suspect to customer.  Once you know what matters, you can design a measurement system that will drive results.

These are just two examples of analyzing your business processes so that you can measure what matters.  You should be able to look at each area of your business and walk through this process to determine what matters to your success.  This doesn’t have to be a big process and you don’t have to “get it right” the first time.  The critical point is that you start asking questions and observing your business…you will more successful as a result.  You can “get it right” as you go!