Entrepreneurs are typically excellent at building products and nurturing new customers. However, many falter when it comes to collecting and analyzing relevant business data that can take them beyond the start-up phase. This data, known as sales metrics, is essential to business growth. The reason for this is that managers of new businesses cannot increase revenue if they have no idea what drives sales. Without sales forecasting software or any sales metrics, these start-ups will quickly lose out to the more established competition. While numerous sales metrics exist, those just starting out should be certain to focus on the three described below.
Sales by Lead Source
Not every advertising lead is created equal. Some surpass initial expectations while others are extremely disappointing. The term sales by lead source means that companies need to budget the most advertising dollars for methods with a strong return on investment (ROI) and discontinue those that do not. While this may sound obvious, organizations that fail to track their advertising results end up wasting a lot of money.
In addition to optimizing lead generation, tracking sales by lead source allows start-up managers to see when previously lucrative advertising sources start to decline in ROI. They can then determine the source of the problem and take steps to correct it or discontinue using that advertising source.
Cost of Customer Acquisition
This sales metric incorporates all costs associated with acquiring a customer, including marketing and sales efforts. Entrepreneurs can figure their cost of customer acquisition by dividing the total of all acquisition expenses over a set time by the number of new customers acquired. The resulting figure lets business owners know if their investments in advertising and marketing are returning an acceptable amount of revenue.
As a start-up company grows, its revenue should increase and its cost of customer acquisition should decrease. This should happen naturally as more people become aware of the company’s brand image. It really helps to have brand recognition when doing telemarketing or outreach activities. It is also important for managers to check average sales for their industry to ensure that their organization remains competitive.
Defining the Pipeline
A sales pipeline describes a company’s unique approach to selling. It includes the steps each salesperson takes from their initial contact with a prospect to qualifying him or her as a lead to closing the sale. Successful organizations continually evaluate the sales pipeline metrics to ensure that it allows the sales department to meet individual and team goals.
Even at the earliest stages of business development, entrepreneurs should know what makes up their company’s pipeline. Does it have a healthy balance of large deals, small transactions, add-on business, and new business? If not, managers should look at issues such as the timing of new opportunities and consistency in sales approach. Another thing to consider is the pipelines of a new sales professional will look quite different than someone with a decade of experience. Each should be aware of their own pipeline and be self-motivated enough to improve it.
Once the new business owner has mastered these three metrics, he or she is ready to take on even more.
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