“When you’re thinking about your key performance indicators, you’re thinking about where growth is going to come from.” – Todd Caponi in today’s Tip 1672
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Transcript
Scott Ingram: You’re listening to the Daily Sales Tips podcast and I’m your host, Scott Ingram. Today’s tip comes from Todd Caponi. Todd is the author of what Book Authority has ranked as the 6th best sales book of all time, The Transparency Sale, as well as the award-winning book, The Transparent Sales Leader. Todd is a multi-time C-Level sales leader, a behavioral science and sales history nerd, and has guided two companies to successful exits. He now speaks and teaches revenue organizations and their leaders on leveraging transparency and decision science to maximize their revenue capacity as Principal of Sales Melon LLC. Here he is:
Todd Caponi: Today, I wanted to take you through a simple formula that I used to use as a Chief Revenue Officer in the way that I thought about investments, the way that I thought about our numbers, the way that I thought about growing the business. I even used this as a formula that I used to talk to my CEO to present our numbers to the board, and I thought it might be helpful for you. Now, I didn’t invent this. I found it, it’s like 25 years old. It’s been around forever, but I made it my own. Here’s the way that I want you to think about it.
Your results from a revenue perspective are the combination of four key elements.
Number one is the number of opportunities. You need opportunities to generate revenue, of course.
Number two is how much is each one worth.
Number three is your win rate. How often do we win those qualified opportunities?
Then number four is your cycle length. How long does it take to close each one of those?
The combination of those four things is what leads to your results. Here’s the amazing thing about it.
Number one is this really helped my hone my focus on KPIs. If everything is an indicator, then nothing is a key performance indicator, these are your four. Let’s start there.
Number two thing, though, I want you to think about is tiny, teeny incremental gains on each one of these things. The results are massive, and here’s what I mean. If we just increase the number of opportunities that we qualified by 5%. So for math’s sake, let’s say you got 20 qualified opportunities, 5% is one. So grow that to 21, all right? Dollar value of each, if we raise that by 5%. Again, teeny tiny amounts, right? We just get a little bit better about messaging, positioning, and we get a little bit more dollars on each one of those deals. $40,000 deal, five percent’s $2,000. I wasn’t a math major.
Number three is your win rate. If we raise our win rate by 5%, meaning if you’re winning 60% now, or 5 %, 63 %, it’s probably one deal. Meaning we get smarter about the opportunities that we’re qualifying, so we’re working the right ones and we do better in our messaging, our positioning, and guiding buyers through the buying journey. That’s really easy.
Then cycle length. If we reduce this by 5%, which is typically like a day or two. It’s about efficiency in the sales cycle. Setting next steps and bringing people to get helping the customer do their homework for them so they don’t have to do a bunch. You can shrink sales cycles pretty dramatically pretty quick 5% is a couple of days. But if we do all of those things together, raise each one by 5 % across the top, lower the cycle length by 5 %, you will grow by 21%.
Do the math. I’ve put it in spreadsheets. I’ve tried all of this. This happens. So small incremental gains in your key performance indicators lead to big results. If each one of those is 10% and this one along the bottom goes down by 10%, this number goes up to 41%.
So when you’re thinking about your key performance indicators, you’re thinking about where growth is going to come from. It means looking at the way that you measure the business, looking at the investments that you make, and making small incremental gains on each one just by being a little bit more efficient is going to get you much bigger results and growth than maybe you thought possible. And when you think about communicating this to your teams, there’s a real opportunity for them to be able to see where massive growth can come from 21% sounds like a number went up by 21%. How am I going to do that? Tiny gains in each one of the things that matter, and you’re going to see those results. All right, hope that helps. We’d love your thoughts. And if you need any help, let me know. Thanks.
Scott Ingram: For more from Todd, including the video version of this tip, just click over to DailySales.Tips/1672. Once you’ve done that. Be sure to come back tomorrow for another great sales tip. Thanks for listening!