Businesses have thousands of moving parts, and keeping track of what is actually important can seem like an insurmountable task for managers and small business owners. The reality of the situation is that every organization is unique, and an aspect of a business that is vital to one company may be completely useless to another. So how can managers gather all of the information they need to make impactful decisions?
The answer is Key Performance Indicators (KPIs). At their simplest, KPIs are a way for managers to track important statistics. When utilized correctly, KPIs are more powerful tools, able to compare various product, employee, and organizational variables and give suggestions based on their results.
Managers might want to create custom KPIs tailored to the specifics of their business. While this is a fantastic practice, it should not take the place of certain fundamental KPIs that proven sales leaders utilize within their organizations. To better understand some of these foundational KPIs, I've drawn up three hypothetical scenarios.
1) Rep Territory Coverage
Bill is the founder and owner of a small orange-flavored beverage company named CitrusSplash. He currently employs 10 reps who are responsible for visiting existing stores, taking purchase orders, and performing retail audits. Each rep has an assigned territory consisting of a varying number of stores, and is expected to cover that area weekly.
Although sales are up and most retailers seem happy, Bill is worried that some of his reps are underperforming. To address these concerns, Bill uses a Rep Territory Coverage KPI.
To quantify his data, Bill gathers employee visitation data for an entire week and begins to input it into his KPI. Bill sums the total amount of stores in all territories and divides it by the number of reps to get an average territory size. He then performs the same function with the number of completed visits.
Dividing the average visitation by the average territory size gives an average territory coverage for the entire organization. Bill can now compare each rep’s performance against the company average and see which reps are lagging behind their peers in terms of productivity.
To take this one step further, Bill could have set his KPI to give recommendations based upon the rep’s current territory size, coverage rate, and comparison to average.
2) Price Promotion Impact
Jennifer is a regional manager for ShinyWatches, Inc., a luxury watch producer with an established retail presence. Some of Jennifer’s primary duties involve monitoring product sales and creating new sales promotions for a variety of watches. Although the watches are selling well, Jennifer has noticed that certain promotions perform far better than others, and wants to better understand what promotions should be run in the future. With this in mind, Jennifer begins to review her promotional and sales data to better use the Price Promotion Impact KPI.
She begins by taking the three promotions she feels are most effective and inputting the discount from retail that each promotion provides. She then pours over sales data, entering both the original retail price and the number of sales occurring at each price point. Jennifer’s responsive KPI template does the rest of the work for her, quickly displaying each promotion’s sales impact for each product, as well as the average impact each promotion had across all products.
With her new wealth of knowledge, Jennifer is able to more effectively choose promotions going forward, taking into account profit margins on each product and the boost to sales that occurs from price promotions. In the following months, Jennifer’s stores quickly become sales leaders for the ShinyWatch brand, due in no small part to her practice of data-driven decision making.
3) New Accounts Approached
Jack opened a local pool cleaning and maintenance service two years ago by himself. Since that time, he has expanded into seven new towns, hiring 10 sales representatives in the process.
The pool-cleaning business is booming, but Jack wants to expand more quickly, and feels that a more refined employee performance review process will allow him to do so. As all of his reps are equipped with mobile field activity management software, Jack is able to see in real-time when one of his employees approaches a new account. To take advantage of this data, Jack uses the responsive New Accounts Approached KPI.
Jack has decided he will monitor each employee’s new account visiting numbers weekly for the next month and then act based on the results. He begins by inputting each employee’s name into the KPI template and then monitors new account visits throughout the week, adjusting his numbers as new data comes in. After the first week, Jack’s KPI is able to show what the average number of new accounts approached was for all employees, and how each individual compares to that average.
The results were interesting --the top performing employee this week approached more accounts than the bottom three performers combined. After three more weeks, Jack noticed that the trend was persisting and decides to hold a meeting with the under-performing employees to encourage them to increase the number of new accounts they approach.
Making continuous tweaks, Jack begins to notice that week after week, each employee got closer to the average number of new accounts approached. A standard has now been developed for what is an acceptable number of approaches each week, and Jack is able to offer clear goals to his employees and see a pipeline of new accounts increasing rapidly over the next year.
As evidenced in these examples, being able to input data into a responsive formula as you collect it means that managers can quickly react to changes in their environment. Whether that means changing working conditions for employees, reducing costs in certain areas of the business, or running one promotion longer than another, KPIs for sales are a surefire way to quantify and better visualize the intricate details of any business.
For 12 in-depth and responsive KPIs that can help guide and inspire managers and business owners, download this free KPI Toolkit here. Adapting the tools within to fit your own organization is a fantastic way to start making data-driven decisions within your company.