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The reason we hire salespeople is to improve the odds that the right numbers will happen on time. You can talk about softer stuff such as “relationships” and “value creation”, but we build sales teams to make certain numbers by certain dates. If there was a better way, we wouldn’t hire salespeople. That is in fact already happening; sellers are being replaced with digital tools. So a sales team is really an odds improver and a risk reducer in a business.
Yet, we don’t really track nor measure risk and odds at the weekly sales meeting. We look at KPIs, lots of numbers and dashboards, which not only don’t highlight risk, they hide it. They provide false comfort until next week. But it’s the measurement of risk that identifies gaps, tells us what might be missing and gets us working on filling the gap by next week.
You can very effectively run a sales team of two or two thousand on two Big Risk Metrics (BRMs): Risk-to-Revenue and Risk-to-Growth.
Risk-to-Revenue: As the name suggests this metric tells us if the required revenue (gross sales, fees, margin, etc) is going to be delivered on time, in the week, month and quarter.
Risk-to-Revenue looks specifically at the likelihood that the revenue in the pipeline can do the distance in the time available. What happens in sales pipelines is that there might be $Xm of revenue but it might as well be on the moon: the distance is too long in the time available. To make the month for example, ideally you need your Closed and Commit revenue to be in place by at latest the 15th of the month; usually the second Monday. We call this being in the Green Zone.
Risk-to-Growth: This metric takes in the short, medium and long term: one of its roles is to protect the business two to three years from now as well as this week.
The growth of the company is a function of the growth in opportunity creation, whether from new or existing customers or accounts. We are not just referring to net new business here. Opportunity creation cannot be a top-up option. We’re referring to new, scheduled opportunities, where the seller’s name is in the buyer’s calendar. A critical moment in pipeline creation is the first time a buyer engages on a scheduled basis with the company.
Senior management needs to make new scheduled opportunity creation a strategic weekly priority. But the actual metric to track is specifically, the moving average of new scheduled opportunities created per week. That allows for shorter term fluctuations, while protecting the Risk-to-Growth metric.
Check your pipeline and CRM today to see what might be the Risk-to-Revenue and Risk-to-Growth situation. Where there is unacceptable risk, that’s the gap to fill which should drive objectives, key results – and lower-level KPIs.
This post was written by Michael McGowan