Two Sales Metrics Every Contractor Should Track
Guest Post by Michael J. Goater of Success4Others
There are dozens of KPI’s and Data Points we can look to in our contracting business to help get our fingers on the “sales pulse”. What we look at typically depends on our current CRM (customer relationship management) platform, the existing knowledge we already possess and the notes from the last conference we attended.
However, no matter the data point, one thing is always for certain; What gets measured, gets improved!
In business, as well as in life, whenever we turn our attention to any particular item of interest, we always receive measurable results simply from our shift in focus. This is also true for one of the most important pieces of any business – sales!
Just looking at your revenue for the month doesn’t tell you much. If it takes 10 sales people to sell $10K, you’re not making money, even if that’s your sales goal. So you need to dig deeper, and look at the numbers that can really drive your business.
Revenue Per Lead (RPL)
Revenue Per Lead (RPL) – RPL is a simple calculation that provides you with tremendous insights into your sales/field team’s performance. First, you need to identify how many qualified opportunities you have for the day, week, or month and then calculate how much revenue these new sales opportunities yielded.
Total Revenue / Total Opportunities (Leads) = Revenue per lead
By knowing the Revenue Per Lead (RPL) of each member on your team you will quickly be able to identify your best performers and enhance your “dispatching for profit” abilities.
RPL looks at everything, whereas the closing rate and average ticket only provide you half of the picture.
Salesperson #1 ran 10 leads and generated $50,000.00 in top-line revenue. Let’s say this was based on 4 sales, so a 40% closing rate and an average ticket of $12,500.00.
Not too shabby and many of us would be thrilled with the top line revenue, even though the closing rate is lower than what we currently expect from our team.
The RPL for Salesperson #1 would be $5,000.00 ($50,000/10)
Salesperson #2 runs 5 calls and generates $30,000.00 in top-line revenue. This person sold 3 appointments and has a 60% closing rate and an average ticket of $10,000.00.
The top line revenue is $20,000.00 less and average ticket is $2,500.00 lower than Salesperson #1.
In a dispatch for profit scenario, many managers/owners will instruct the dispatching team to make sure that Salesperson #1’s schedule is full first and then start to schedule the access leads with salesperson #2.
But let’s look at the RPL for Salesperson #2.
$30,000/5 = $6,000.00 RPL, which is $1,000.00 higher than Salesperson #1. What this translates into is an additional $1,000.00 of top-line revenue for every lead that we schedule for Salesperson #2. If you can generate an additional $1,000.00 for every lead, shouldn’t we be filling salesperson #2 schedule first?
Where this helps the most is when you have a salesperson who likes to “swing for the fences”. They might start off really fast or even really slow each month compared to other members on your sales team, but we keep feeding them leads.
RPL will allow you to see a clearer picture. It takes into account all the data that really matters. Top Line Revenue, Closing Rate, Average Ticket and even help provide a window into your teams follow up success rate. The higher the RPL, the more leads that representative should run.
Booking Rate – We invest so much money in marketing month after month and year after year with the intention to “feed the machine” and grow our business, our market share and yes, our profitability.
What I have found is that many businesses do all this, and they don’t know their booking rate. The booking rate is simply a percentage of calls booked/scheduled versus the number of calls that came in.
Number of Calls Booked / Number of Calls Fielded = Booking Rate
Many companies are investing 3% to 10% of their total revenue in marketing. Let’s face it, we know our business better than anyone else and we know how to sell our products and services at a price point that yields a profit, but we may not be the best marketing guru or have much knowledge of the online marketing strategies as we would like. So many of us hire a 3rd party provider to help us manage the marketing side of the business.
The marketing company provides you colorful charts and graphs at the end of each month and tell you all the ways that their services are working for your business, but when you look at the P&L and Balance Sheet, the growth that they are bragging about is not showing up. Is it time for a new marketing company? Is it time to rebrand your website? Is direct mail really working?
Although these are all great questions and ones that you should be inspected regularly. There is another data point that needs to be explored first. The Booking rate of your call center and internal team.
In many cases what you will find is that the marketing campaigns, at least some of them ARE working but when the phone rings in your office the person on the other end of the phone doesn’t even know about the promotion the caller is interested in. Or your representative doesn’t have the knowledge to answer the questions of the caller and most importantly, they aren’t recognizing this call as worth hundreds or thousands of dollars and doesn’t possess the urgency or closing skills to book the call.
If your current phone system records your inbound phone calls, when was the last time you listened to 10 inbound calls from each of your call center reps? If you haven’t in the last 30 days, YOU NEED TO right now. What did you think? Did they say what you would have said? Did they identify potential opportunities in the conversation and pick up on those to create urgency and book the call on the right day, at the right time and with the right Salesperson/Representative?
In many cases it isn’t that we need to increase or marketing spend, it’s that we need to better train our people answering the phones to accurately identify the callers need, empathize/ relate to the caller and then provide the caller a solution that works best for them which will make good sense.
Identify your current booking rate and make this a focus for everyone on your team. Get this at or above 80% and then go back to your P&L and Balance sheet to inspect the return on your investment of time and energy. I think you will be very pleased with what you discover.
Invest a couple of hours of your day and pull the data you need to calculate your teams RPL and Booking Rate. If nothing else, this information will get your mind running down some new paths and will only help you increase your ability to “feed the machine”, grow your business, increase your market share and yes, enhance your profitability.