Improve Sales Team Performance with Simple Sales Analysis
High Performing Sales Teams Set Goals and Track Performance
Analysis for a sales team doesn’t have to be a fancy analytics dashboard with high subscriptions to achieve results. In fact, you can lose the team to analysis -paralysis if there is too much data. Use simple straight forward analysis for tracking sales goals and focus on small incremental wins to get consistent needle movement. Most companies never go beyond just reporting the monthly numbers or providing an annual line plot of sales to visualize sales and that’s why they have lackluster results.
Use simple straight forward analysis for tracking sales goals and focus on small incremental wins to get consistent needle movement. Most companies never go beyond just reporting the monthly numbers or providing an annual line graph to visualize sales and that is why they have lackluster results.
The common reasons are:
- Hard to build – The owner does not have the skills to create an easy to use tracking system
- The expense – The owner can’t afford third party business analytics
- Not sure how to use the data- The owner does not have confidence in evaluating the data to provide feedback
In this article, we will address all of these items and send you away with a simple tool for tracking sales and other key metrics in your business to help you (or your team) hit a sales goal.
It all starts with revenue – that will be the metric for this exercise.
Below is a monthly sales chart for a business. A simple line chart of monthly sales.
If you’re having trouble drawing any conclusions or trends don’t feel alone. The reason is the variation from month to month that makes it difficult to evaluate performance.
The solution is the application of some simple averaging to the monthly sales. By applying averaging to these same numbers we can begin to see trends.
We will create two trends from the same numbers, a three month and twelve month trailing average and use the two averages in conjunction to track performance.
Three Month Trailing Average
We take the current month plus the two preceding months, add them together then divide by three. In the example chart, three years of data have a three-month average applied. The averaging helps to smooth out the ups and downs and we begin to see some trends develop. we want to strike a balance on the three-month average where it can show us seasonal movement and has a quicker reaction to changes (more on this in a moment).
Twelve Month Trailing Average
We take the same data and add current month plus the eleven preceding months together then divide by twelve. In the example chart, three years of data have a twelve-month average applied illustrated as the red line. The larger averaging smoothes the data to the point where we can now see a gradual slope upwards; clear indication that there is consistent growth.
How to make the most of this performance indicator
There is a reason why we chart both a three month and twelve month indicator on the same chart. Simply by working to keep the blue line (T3M) at a consistent growth rate above the red (T12M) will result in your business growing. How simple is that for guidance. The reality of most businesses is that the blue line will move up and down with seasonal trends or business cycles. So the first order of business is to use the visual cues to decipher seasonality or business cycles and help you to understand your business better.
Understanding your business cycles
It may be seasonal or it could be some other cyclicality in your business but knowing the cycles and having a visual indicator of where you are in the cycle is important. You can plan better when you know where you are in the cycle and the amplitude of the up or down cycle.
Seeing big shifts
A breakaway of the three month above or below your twelve month is a key indicator to pay attention to as a time to make hay or batten down the hatches. Getting an extra two to three months warning of a systemic downturn allows you to get ahead of the competition in preparation for the downturn and out in front of the pack when the tide changes.
The Goldilocks Growth Rate
Is there such a thing as too much growth? Yes
If you outstrip your working capital you will begin to have issues with cash flow or lack of inventory. You can learn more about figuring your right growth rate in the Financial Command chapter of the Business Owners Compendium.
If you are unable to determine an appropriate growth rate for your industry to meet or exceed look at the historical compound annual growth of your business. If you use the free worksheet I offer, the growth rate is calculated in cell K2. You can take this number and add a percentage point to it as your first goal.
If your goal is to drive serious growth, I suggest doing an analysis of your working capital. This will determine how much capital is needed for growth while avoiding disappointing your customers and sales team because you outrun your cash flow.
Using Rate of Change for business analysis
The Rate of Change is a derivative of our trailing averages and helps us to easily quantify expansion or contraction of sales. What we look at is the change from one month to the next. We can now simplify things with this indicator and establish a goal to have either a neutral result zero or a positive result being any positive number. The further from zero the bigger the magnitude of the change. When I use this system with a sales team, we focus on the three-month rate of change, work to eliminate the downturns and have an incremental win each month. This work flows through to the twelve-month indicator and begins to stabilize the business to a steadier growth pace.
Making the day to day impact the annual growth
Weekly meetings on what the team can do to create a 0.5 ROC for the next three months in a row is near enough and realistic that you can get buy in. Questions like “what can we do each week this month” to beat last months sales by one-half percent.
Individuals working as a team
Have each team member track their sales with the same tools. In addition, require them monthly to present what they are doing to impact the rate of change number and to experiment with what causes sales. For example, if they write more proposals or go to more networking events, do their numbers improve? Over time your team will pass on the best practices they discover to each other.
If you would like to get a free copy of the worksheet I discussed in this article then click on the FREE File Download button below to get it sent immediately.