Magic Number Calculator - A Diagnostic Approach to Sales Performance
I walked into a VP of Sales mission with a sales organization consisting of 120 reps spread out over 12 sales regions. They were running at 38% of revenue goal for over 2 years. I threw Quota out the window for 90 days. 8 months later sales units sold increased by 520%.
Find out how.
We discussed the most overlooked Key Performance Indicator is the "magic number," which refers to how many new appointments a sales rep must generate each week in order to achieve their revenue goal. In early 2000 I walked into a VP of Sales mission with a sales organization consisting of 120 reps spread out over 12 sales regions. They were running at 38% of revenue goal for over 2 years. I ran a KPI study and determined they were running 2 new appointments per week/rep, but their KPI’s dictated they needed to achieve 7. So I announced a training objective to enable them to do it effectively, (now branded the X2 Sales System®) and threw quota out the window for 90 days. But I replaced the monthly quota with the weekly ‘magic number’.
8 months later sales units sold increased by 520%.
A rep's magic number is determined by looking at several of her other KPIs. Say, for example, that your company sells copiers (for which an average sales cycle is 45 days) and that a rep's monthly sales revenue goal is $15,000. Her average revenue per sale, meanwhile, is $2,500; her current first-appointment-to-proposal ratio is 60 percent; and her closing ratio is 40 percent. What's her magic number? In other words, how many new appointments does she need to set each week in order to achieve her sales revenue goal of $15,000 per month?
The Magic Number Formula
Monthly sales revenue objective: $15,000
Once you have identified the magic number, the next step is to determine how many new appointments a rep is currently generating each week. If she is falling short of her six-appointments-per-week goal, your job as a sales trainer is to find ways--through targeted KPI training--to help her bridge that gap and achieve her "magic number."
Here are some tips for doing just that:
1. As an organization, announce that the ability to convert conversations into appointments will become a KPI of the sales process.
2. Define an appointment-setting objective and train to that objective. For example, if the average weekly amount of time that sales reps devote to prospecting new clients is 22.5 hours (out of a 45-hour workweek), your organization's objective might be to cut that prospecting time in half (to 11.25 hours per week) while simultaneously exceeding current appointment-setting levels. With your objective in place, it's now time to break down and document the steps in the prospecting process and train reps on how to make better use of their prospecting time during each step.
3. Map out all possible scenarios that might occur during the prospecting process. Once you have done so--and documented best-practice strategies for handling each scenario--create mini training modules and/or job aids that show reps how to handle each scenario effectively.
4. In addition to enhancing reps' prospecting skills, another way to ensure that they achieve their "magic number" is to help them improve other KPIs in the "magic number" formula, such as their closing and first-appointment-to-proposal ratios.
> To increase their first-appointment-to-proposal ratio, for example, your training might encourage reps to start at the "top" with those who have fiscal authority and can "call the shots." Training might also pinpoint ways for reps to avoid "selling" products during the first appointment by providing them with an outline of the diagnostic steps they should follow in order to evaluate the fit between their solution and a prospective client's business objectives.
>To increase reps' closing ratio, meanwhile, the training you develop might show reps how to ask pertinent questions to determine what a prospective client's decision-making process entails, what the client's internal criteria for change include and which players need to be involved in the sales process in order for proper evaluation of a product to occur. In addition, your training might show reps how to catalog risk factors (e.g., possible objections or reservations a client might have regarding purchasing a product or service from your organization) for each player involved in the decision-making process and then provide reps with strategies, tactics, and tools for direct communication with clients based on those risk factors.
In the end, targeted, effective sales training can make a critical difference to your bottom line, and so can effective goal-setting. In today's high-performance sales culture, it's up to trainers and sales management to work together to focus more on daily and weekly goals and less on monthly or quarterly quotas. Success in doing so rests on the ability to switch paradigms from looking merely at required end results to also determining the necessary KPIs it takes to get there--and then building supporting tools and training to help sales reps along the way.
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ABOUT THE AUTHOR
Jeff Hardesty is President of JDH Group, Inc. and the Developer of the X2 Sales System®, a blended training system that teaches sales professionals the competency of setting C-level business appointments.
Jeff can be reached at firstname.lastname@example.org. To view a complimentary suite of sales training ROI calculators and determine your sales team’s Key Performance Indicators in line with your sales objectives visit http://convertmoresales.com/roi_calculators.php.