We are carrying on with our series focussing on the top challenges faced by SME leaders last year.
In each article, we discuss practical steps you can take to navigate through these challenges in 2019.
The Challenge: Measuring the wrong thing (and making bad decisions as a result)
It seems like a natural way to keep it simple and drive sales performance. This common pitfall however can lead to poor forecasting and inhibit effective strategic decision making. So what is it?
Measuring the sales pipeline based on when orders are expected to be received – rather than the actual impact of them.
This may sound subtle, but a failure to measure the sales pipeline according to when the revenue will hit the P&L can be a silent killer. It inhibits operational and financial planning and can often lead to a divide between sales and the rest of the business.
We see it over and over – the sales team sound the fanfare when a large order has been won.
“Over to you Operations Department!’
Meanwhile, the near-term benefit to the P&L and cash may well be negligible. Apply this across the entire sales pipeline and the gap between perceived sales performance and the company P&L is magnified.
For the same reason, the company has a difficult task to plan financially, and sales leaders are disconnected from the company P&L.
Our recommendation is to measure sales opportunities on a recognised revenue (P&L) basis.
Armed with this view, focus is automatically placed on the projects (existing and potential) which best align to the P&L pressures the company is faced with.
Combined with well communicated and non-subjective sales cycle categories (as discussed in article 1), this measurement serves as a single dashboard for the entire business:
- The Leaderships team has better visibility to make informed strategic decisions
- Operations are able to better plan resources further in advance, and communicate pressures before commitments are made to customers
- Sales leaders can manage performance towards helping the business to meet budget/target. They are better able to influence/execute strategic direction
- Finance are better equipped to make accurate P&L and cash forecasts
So however you currently document your sales pipeline, consider if you can record opportunities according to the monthly revenue phasing. It may mean extra effort right now, but owner managers we have worked with wonder how they ever functioned without it.
“The team have opened our eyes”.
Look out for our next article – focusing on one-dimensional activity targets which lead to…nothing
Next time, we will discuss challenge #3 of our 7 most common sales-related challenges identified in 2018: focussing on one-dimensional activity targets.
We will explore why one-dimensional sales activity rarely has the desired impact. We describe how you can empower your staff to play to their strengths whilst ensuring they are accountable for their performance.
To receive the rest of our key challenges facing SME leaders in 2018 (along with other helpful sales-related tips) directly to your inbox, subscribe to our Members List.
Do you have the tools you need for 2019?
BMC has provided sales performance services to business leaders and stakeholders for over 15 years. We quickly get clarity over your businesses real position, then focus on the areas which will have the most immediate impact on sales performance.
Contact our team today to learn more about how you can achieve better visibility of your business’s sales pipeline and lead your team to success in 2019.