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Moneyball: 3 KPI’s That Will Make You a Better Coach (Building a Salesforce, Part 3)
KPI’s are worthless unless you do something with them.
You don’t manage a salesforce, you coach them, and whether they are new to the team or your star player, everyone needs a coach. And just as with a sports team, you don’t use KPI’s simply as a reporting mechanism or accountability tool, they are indicators.
As you grow your salesteam, it’s critical you not merely create the right KPI’s to set expectations but that you use these KPI’s to determine next actions. When you go see your doctor, she has a list of KPI’s she measures. Your weight. Your blood pressure. Your pulse. These are all indicators that the doctor then uses to diagnose any problem, to look for opportunities for improvement.
“The most valuable player is the one that makes the most players valuable.”*
I don’t know about you but, when it comes to a sales team, I wish I had learned the lesson of coaching vs managing a long time ago: a sales manager micromanages process; a sales coach inspires progress. So, which KPI’s are most critical for the promotional products salesperson and more importantly, how do we use these KPI’s to dramatically change the trajectory of a rep's performance?#1 KPI: Margin is an attitude.
Industry average margins hover somewhere between 32% and 35% but the most successful salespeople are commanding margins between 35%-40%+.Creative, successful salespeople in this business are ingenious: they take a product that virtually anyone can get and create a unique experience for their customers that no one can emulate. That’s what the best salespeople do for their clients every day. It’s this confidence, that we create unique experiences through tangible products that command higher margins.
But how do we make margin a leading indicator and not a lagging indicator?
In our previous post, we looked at what a typical new salesperson’s growth pattern is like. For example, in their second year, a brand new rep should be producing around $200,000 in sales.
Consider this second-year salesperson’s success and note the difference six simple percentage points make. A $200,000 sales rep with 35% margin equals $70,000 in gross profit and yet a 40% margin equals $80,000. This seems like a slight increase except when you consider that the amount of energy and work it takes to produce this number is the same.
There is virtually no difference between the amount of work that went into that additional $10,000.
And, by the way, not only does the cumulative total of a 5% margin difference over their sales history amount to thousands more in profit, when the rep hits a certain threshold, the factor is stunning: with a 5-6% point increase, a million dollar rep can add an additional $50,000 in profit to the bottom line by exerting all the same energy.Your role, as a coach, is to not only provide reps with the right training to hone these skills but to help reps fine-tune their unique skill set and then encourage them to find the right clients that will respect their craft, and reach for the types of sales that will command the highest margins.Analyze margins by client and you’ll find out where you need to adjust to improve overall margin growth. Respect is something we earn from customers but it’s also a minimum requirement in a working relationship for those who are commanding large sales: the more respect you earn, the higher your premium.
In the most watched Creative Mornings talk of all time, designer Mike Monteiro’s talk “Fuck You, Pay Me,” said that you learn about the confidence to sell at higher margins so “you can do the stuff you really love doing that much longer and that much better … you have a lot more power than you think you have.”
#2 KPI: Expectations and Reach Goals
One critical lesson I’ve learned through the years is about perspective: how you look at things, changes the way you think. And as a coach, if you can change the way you think, you can change the entire velocity of your team.Remember the movie Moneyball? Manager Billy Beane (Brad Pitt) and his assistant GM Peter Brand (Jonah Hill) began interpreting the same old numbers with a different perspective. It shifted dramatically how they recruited and coached their team.
When you are in sales leadership, you view your team from multiple perspectives: week-by-week, quarter-by-quarter, month-by-month, and year-by-year. Each perspective yields a different coaching point and we use lagging indicators (previous history) to unlock leading indicators.
What do I mean?
Our minutes shape our hours. Our hours shape our days. And our days shape our weeks. As a coach, you think broadly and act specifically; broadly: “How do I get this person invested in winning, because, if we do, over time, they will be phenomenal.” And thinking specifically: “How do I act on this KPI?”
So, what KPI’s should we monitor and how do we set these for optimized individual performance? Like in Moneyball, we thought we’d provide a different way of looking at things, through the lens of time. Through this perspective, we’ll look at sales goals and targets to watch for every star player:
- Year-by-year: Is each star player aware of their future success? Are they aware of the monetary potential? Do they know it so well it burns in their memory? A review of potential growth (against current growth) charts progress, but also helps your reps understand their personal gain. Many salespeople are deep-in-the-weeds taking care of clients. As a coach, we’re trying to help them see that each win leads to the ultimate big game: that they can carve a lucrative career in this business. Knowing that they can earn several thousands more in annual income not only keeps their mind on target but also helps everyone ensure that they are always working toward larger orders, higher margins, and premium customers. As a coach, your year-by-year review is your chance to inspire your star player to think big or go home!
- Quarter-by-quarter: The quarterly viewpoint gives you the closest perspective on how a sales reps total sales growth is progressing YTD. For example, if you compare 1st QTR’s sales to their year-end goals, you can see whether they are 20% ahead of their annual goal or 20% behind. This lagging viewpoint becomes a leading indicator when you can look at the next three quarters to see what foundation of sales (clients) you have to build on and what clients you should be focusing on for future growth. A quarter-by-quarter viewpoint sounds unimportant but it’s the best indicator for average annual progress, as monthly sales fluctuate too wildly to be a clear indicator.
- Month-by-Month: What should we monitor month-by-month? For one: top line sales in comparison with the previous year's month. But to make this a leading indicator, we’re looking both at previous months history compared to this months but most importantly, we’re looking at the next few months and the anticipated activities that will help us hit our goals. A month-by-month view helps sales reps see the upcoming gaps. Moreover, we want to prevent dramatic peaks and valleys (the industry’s dreadmill!) We want to smooth out their progress and produce consistently good months. If they had a monstrous Sept last year but a weak Oct, they know that the month preceding each has a different opportunity, moreover, they know they’ve got work to do diversifying their client base or their sales portfolio to produce consistently high months.
- Week-by-week: You have 52 weeks. 52 games. That’s it. And it goes fast. The week-by-week perspective is the most important. If the views listed above are the only views you look at, then your athlete descends into “pray and wait” mode. Looking week-by-week helps the salesperson manage the client relationship from the driver's seat. You should be looking at YTD sales, opportunities in the pipeline, open presentations, and their weekly activities (if you are on commonsku, these metrics are revealed through the sales rep report). Here’s the most important thing about the week-by-week viewpoint: It unlocks the next action. For each client, for each opportunity that is hung up, as a coach, you ask: “What’s the next action?” The dialogue then becomes less about hope and more about moving the client. The next action might be a simple phone call, a spec sample, anything to create a next action with the client, but the rep should leave with a clear action plan based on what they need to close. “What’s the next action?” keeps you from lingering in analysis paralysis.
#3 KPI: The Intangibles
This is a tough business.There are thousands of opportunities to drift in and out of emotional highs and lows.
Remember that sales is largely a head-and-heart game. Sometimes your athlete wins (big sale, new client) sometimes they lose (fucked-up order or lost client) and as a coach, your equilibrium and long-term outlook is important.
Your perspective should be that you’re trying to develop an athlete (not merely win a game). This is critical so that you can give individualized performance feedback, not only so they know where they need to work but so that they lift their heads out of the maddening deadline-driven, detail-demanding pace to see the whole picture.
Coach: KPI’s are not only kick-starters for the rep but they are kick-starters for you! The annual, monthly, weekly reviews are times that your internal coach needs to sit up and pay attention to their needs. Use these times to look beyond the numbers. KPI’s should always trigger a series of new things to work on or changes to make, and the more questions you ask yourself about what your star athlete needs in this particular season, the better the outcome of their performance.
- Does your star player need additional training?
- Do they need an inspirational coaching moment to help them through a tough time?
- Are they excellent at sales but selling to the wrong client?
- Are they stuck in processes that bury their skill instead of unleash their potential?
- Are the cross-selling categories?
- Creating proactive sales?
- Are they doing daily micro-business development?
Every salesperson you recruit and even the seasoned pros (still) have yet-realized-potential. And it’s your job as a coach to unlock that potential.
Establish expectations, evaluate KPI’s, clearly communicate the reward for growth, and always, always, always look for ways you can help your athlete improve.
*Peyton Manning