Greetings!
How frustrating would it be to play a game when the scoreboard is always wrong? That's what happens when you manage with bad sales metrics.
Many resellers track and value the wrong sales metrics, and thereby reward the wrong activities. How so? Let’s take a peek.
Mike S.
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Who is the highest earning salesperson in most organizations?
- The most skilled salesperson?
- The most technically-knowledgeable salesperson?
- The hardest working salesperson?
- The one assigned to the biggest accounts?
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The usual answer is almost always #4. Often, this is somebody who's been around a while and has vacuumed up accounts when other people quit.
These people are survivors. Being in the right place at the right time is a skill!
OK, I love top producers. Still, the top dog is almost never the most skilled, most knowledgeable, or hardest working person on the team.
Revenue and Gross Profit are “lagging indicators”, meaning they measure the results of work done many months or years before. Running your business on lagging indicators is like driving your car by looking at the rearview mirror.
Smart sales organization look forward. They measure and track “leading indicators”, such as “New Meetings Set”, “New Logos Won”, “Net New MRR”.
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Which is the most valuable sale? |
- A $100,000 Product Sale?
- A $50,000 Project Sale (product and services)?
- A $25,000 Professional Services Sale?
- A $1,000 per month contract for Managed Services?
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In many cases, not only is #4, (the lowly $1,000 MRR sale), the most valuable, it may be more valuable than #1, #2, and #3 combined*. (see sidebar below for the math details).
Monthly recurring revenue is vastly undervalued and underpaid by most resellers, even though they understand intuitively it’s a more desirable sale.
In the landmark book "Moneyball", Michael Lewis describes how a small-market baseball team out-smarted and out-played vastly richer clubs. How? By identifying market inefficiencies to “buy low” and “sell high” on baseball talent. The IT Sales Business is ripe for a similar revolution.
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What are Better Sales Metrics? |
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The ideal sales metrics will track what's important, not what happened in the past. They will align with the reseller's priorities, and they will reward the right behaviors.
Some examples could be:
- MCR: Marketing Conversion to Revenue (how your marketing leads to sales)
- Long Term Customer Value of current monthly contracts
- Conversion Rates for Each Sales Stage to the Next
- Estimated Share of Current Customer's Technology Spending
There are countless more I could list. Some are easy to calculate, such as “Win Rates”. Others require some tracking and math. All of these are valuable metrics that provide insight into sales performance.
Once you start tracking and posting a new metric, sales behavior will change, and you may encounter unintended consequences. One company I know decided to pay bonuses for every “New Logo” sale. Suddenly, everything became a new logo, including branch offices and new departments.
Still, it’s worth it. Just like Moneyball’s Billy Beane (Brad Pitt in the movie), you can win an unfair game by out-thinking, out-smarting, and out-playing your competition.
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Mike Schmidtmann coaches business owners and sales leaders across the USA. He works to drive results in sales recruiting, new business development, and profitability.
Mike led sales for Inacom Communications for ten years. then founded and built a $30 Million business unit for SPS.
Mike produces the award-winning Trans4mers webinar series on IT sales and management subjects. He is a frequent public speaker on business topics.
He lives on a farm in Northern Virginia with his family and assorted horses, alpacas, goats and dogs.
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Financial Benchmarking: Sales and operational metrics.
Best practices to improve profitability.
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"10 Ways to Grow 10% - Training Series with Cyberscurity Guru Danny Pehar.
Practices to find, win, and grow new sales.
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Master Classes: Harnessing the power of video tools to create and deliver stunning presentations |
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Peer Group Discussion: Implementing a sales plan to grow business through cybersecurity. |
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Meet the Rainmakers
Cloud Conventions Webcast featuring Channel Superstars Frank Lusko, Michelle Hyde, and Dave Dyson. What practices cause them to produce as in the top 1% of all Channel Pros and MSPs?
Hosted by Mike Schmidtmann
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Sunny's Silver Linings Podcast
In this week’s podcast, Mike Schmidtmann, founder of Trans4mers, talks with Sunny Kaila, CEO, IT By Design, about how an owner can be an MSP’s biggest asset and also it’s biggest obstacle when it comes to growing an MSP business to the next level.
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$100,000 Product @ 12% Margin = $12,000
$ 50,000 Project @ 25% Margin = $12.500
$ 25,000 Pro Services @ 40% = $10,000
$1,000 x 72 months @ 50% Margin = $36,000
The MRR Sale is worth more than the other three combined
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Play "Stump the Chump"
E-Mail Mike with a vexing and perplexing question and you'll get a telling and compelling reply.
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Mike Schmidtmann
(703) 408 - 9103
Mike@Trans4mers.net
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