Insights | 12.18.18
Coaching to Sales Success with Smart Numbers and Critical Ratios
Coaching of salespeople is usually done as needs arise. If a salesperson has a deal they need to close, they may talk it through with their sales manager. Or if a salesperson has a specific problem submitting paperwork or with technology, coaching may take place. Of course, these items must be addressed. But ultimately, we must coach for sales success. We must coach advisors to go out and win more business.
Success Formula: Each Salesperson’s Smart Numbers and Critical Ratios
Coaching for success starts with math. The details in the numbers will help you help your people succeed. Ask yourself, “What numbers must my team submit?” and then break it down per advisor.
Start with the end in mind. Figure out how much each salesperson must sell, so that your team reaches its annual goal. Making the math easy, see the following example: Assuming you need $500,000 annual new business sales, and you have five salespeople. You know you need $100,000 of new business sales per sales professional. If you know the average size sale is $10,000, then you know each sales producer must make approximately 10 sales. These are the Smart Numbers.
But we must continue this analysis. These Smart Numbers are supported by activities that also have Critical Ratios that must be calculated and tracked. So, now you must calculate the activity ratios per salesperson. (See my recent article about developing strong tracking and accountability processes).
What is a salesperson’s ratio of presentations to closes? What is their ratio of sales opportunities to presentations? What is their ratio of appointments to sales opportunities? What is their ratio of contacts to appointments? And what is their ratio of dials (or attempts) to contacts? These are called Critical Ratios.
Perform this math analysis with each individual on your sales team. Then, establish a benchmark.
If you know that each salesperson’s annual sales goal is $100,000, and you know the current ratios needed, per the analysis above, you will then be able to extrapolate to get the specific behaviors necessary per individual to reach their annual sales goal.
In other words, if the current ratio of a salesperson’s dials (or attempts) to contacts is 10:1, and you know that their ratios of contacts to appointments is 4:1, appointments to sales opportunities is 3:1 sales opportunities to presentation is 1.25:1 and presentation to close is 4:1, then you can approximate that they will need to make 40 presentations, 50 sales opportunities, 150 appointments, 600 contacts and 6,000 dials annually (120 dials weekly or 24 dials daily) in order to reach their annual goal of 10 sales.
Or, starting with the end in mind of $100,000 per salesperson to calculate the levels of behavior that they must perform, take their current performance and calculate:
- 100,000/ $10,000 average sales = 10 sales
- 10 sales/.25 (4:1 ratio) = 40 presentations
- 40 presentations/.80 (1.25:1 ratio) = 50 sales opportunities
- 50 sales opportunities/.33 (3:1 ratio) = 150 appointments
- 150 appointments/.25 (4:1 ratio) = 600 contacts
- 600 contacts/.10 (10:1 ratio) = 6,000 dials (or attempts)
If these numbers are annual numbers, each of these behaviors should be reduced to weekly and daily activity numbers, so that you have the data necessary to coach your people in real time.
In other words:
6,000 dials (or attempts)/50 weeks = 120 dials (or attempts) per week
120 dials (or attempts per week)/5 days per week = 24 dials (or attempts) per day
This is an example of a Success Formula: the daily and weekly numbers that must be identified to hold your people accountable. You will coach your advisors to perform to these numbers. Each week, you can remind each of them of the number of calls they must make to meet their performance goals.
Once these numbers are identified and communicated to each of your salespeople, you should evaluate individual performance against their Success Formula. Compare actual activity against these benchmarks every week to see if each salesperson has completed the behaviors identified in their Critical Ratio analysis.
Once the activity numbers have been identified, communicated and tracked for a time, you will begin to see who is making the effort — dials, contacts, appointments, etc.
There is absolutely no excuse for lack of effort. If you have a salesperson who is not making the effort through dials and contracts, you have a new set of problems, and the solutions are few. You salespeople can either make the effort, resign or be put on performance probation. If they do not improve, they should be reassigned or terminated within a specific time period.
If someone on your team is not making the effort, your sales figures will reflect it. If an individual is not meeting a conversion ratio level identified in the Critical Ratios, you will know what area you must focus your efforts on.
When I was coaching at Iowa State University as a strength and conditioning coordinator, my first task was to evaluate each player’s fitness level. As a result, we knew that when the defensive linemen ran less-than-acceptable times in the 40-yard dash, we would get crushed by Oklahoma and Nebraska because their players were bigger and faster. At the time, our coaching technique sounded something like “You must run faster.” At the beginning of fall practices, when players were out of shape, this may have been adequate coaching. However, as the season wore on and players were better conditioned, this type of coaching was ineffective.
I was subject to this same typical but-less-than-additive coaching when I was in the life insurance business. My manager, Bob, would look at my numbers and tell me that I needed to see more people. How many of us are guilty of coaching people that way? How many of us have been coached that way? This “run harder” coaching technique might be effective with salespeople who are not making any effort or with new hires. But if they are working hard and doing the behaviors, help them uncover their choke points by adopting more constructive coaching techniques.
Download Tony Cole’s eBook The Extraordinary Sales Manager