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The Two-Part Test Every Metric in Your Small Business Needs to Pass

Enrique Ortegon

SVP of SMB Sales North America, Salesforce

Meaningful and actionable. I learned the meaning of those two words very early in my career and they have stuck ever since.

If you’re a small business that wants to grow, you can’t underestimate the value of sales metrics. On a macro level, metrics allow you to set realistic goals for company growth and measure progress. On a micro level, they enable you to continually evaluate people and processes so you can make tactical adjustments needed to stay on course.

But beware. Every metric you adopt takes time to track, report, and analyze. Choosing the wrong metric can set you way off course. Your team could waste valuable hours crunching meaningless numbers.

Which metrics are ideal for your business? There’s no one-size-fits-all answer, you need to decide for yourself. And the best place to start is with a simple two-prong test. For every metric, you consider, ask yourself, “Is this metric meaningful? Is this metric actionable?” Let’s look at how to answer those questions.

Your metrics should be meaningful

A meaningful metric is one that’s relevant to achieve your goals for growth. These three rules will keep you on target.

1. Start simple – but think big

Do an online search for “top sales metrics” and you’ll find an endless list of lists. But when you have wide-open room for growth, it’s counterproductive to get bogged down measuring too many things. Instead, choose a few metrics that are focused on the most important factors for growth: acquisition, retention, and increased sales to existing customers.

Think of your sales potential as an oil field and every metric as a separate oil well. You want to start pumping the wells that will yield the biggest output with the least effort for the longest time. Only when those wells become less productive does it make sense to turn your focus to smaller wells.

2. Measure percentages rather than positions

Quotas are great for setting short-term goals. But don’t get stuck in a quota mindset when your ultimate goal is growth. Gaining 10 new customers in a quarter is awesome when you only have 10 to begin with. That’s 100% growth in the total number of customers. But if you win 10 more customers the next quarter, that means your growth has slowed to 50%.

By regularly comparing percentages you can accurately gauge momentum and find out if and where you need to pick up the pace. Are your deal sizes getting bigger? Are your sales cycles getting shorter? Look at the percentages, and try to find ways to improve your team’s performance for every metric you measure.

3. Measure what makes your business unique

Here’s the thing about the metrics everybody uses: Everybody uses them because they’re generic. If you want to identify key metrics that are meaningful to your industry, your company, and your customers, you need to think more creatively.

Let’s pick an example in an industry that’s near and dear my heart, mountain biking (MTB). As an MTB manufacturer, there are plenty of meaningful metrics you might want to track, mostly related around interest in riding, riding style, and frequency. But a meaningful metric such as interest and riding style would be hard to track. For example, someone’s definition of aggressive and heavy riding might be very different from the next person. Although riding style is a meaningful metric, it is missing something that will make it a good metric to track.

Your metrics must be actionable

An actionable metric is one that is easy to identify and act on, giving you the ability to influence and make clear decisions around it. Here are three ways to make sure your metrics meet the test.

1. Set your goals first – choose your metrics second

Only you know where you want your business to be in a year, or five years from now. And nobody else has a better feel for what it’s going to take to get there. So, before you choose your metrics, make sure you define a clear set of concrete goals that take you step-by-step along a path of growth. Then, as you evaluate different metrics, think about how well they align to your chosen course. Start with the metrics that will help achieve your predetermined goals fastest and most efficiently – don’t be distracted by metrics that stray from the path.

Of course, even the best-laid plans will change over time. So, be prepared to re-evaluate your goals and methods for achieving them on a regular basis. And, adjust your metrics accordingly.

2. Make sure you can influence it

In the spirit of the well-known saying: “what gets measured gets managed. …”, you need to be confident that there is something you can do to move the needle on this metric. Many times I see leaders obsessing over metrics that are removed from their influence, this generates inefficiency and frustration.

3. Assign clear owners to every metric

Here’s where the rubber meets the road. You can track all the numbers you want, but they won’t change unless your actions change. That means every metric must have someone or team responsible for making change happen. It could be outside sales for acquisitions, inside sales for retention, renewal managers for upsells, and so on.

Who owns which metrics depends on your specific business. But regardless of your strategy, every metric owner needs to know three things: They have to know and accept they’re the owner. They must have an intimate understanding of what the metric represents. And they must have a clear understanding of how to move the number in the right direction.

Let’s go back to our MTB example. We identified “interest” as something meaningful. Now, it turns out that historically speaking the MTB sport is male-dominated, but in recent years it has been thriving with females (partly due to clubs, more availability of gender-specific bikes, etc.). The market has expanded and it is important to capture that growth. It also turns out that gender is one of the most actionable metrics out there. It is fairly easy to identify a male and a female rider and the bike they buy. Therefore, tracking bike sales by gender is both meaningful and actionable, making it a perfect metric to focus on. Focus on this metric allows us to gauge progress in capturing a very important market segment and take actions based on campaigns, promotions, etc.

Spin the clock back a few years, though, and the case might have been different. Imagine that interest among women mountain bikers was taking off, but your business didn’t have an inventory of women’s bikes yet. The changing demographics would certainly be meaningful to your company — but until your sales team had new products for women, sales by gender wouldn’t be an actionable metric.

Takeaway

As you do your research on specific sales metrics, you’ll realize there’s no shortage of things you can measure or how deep you can drill into each one. But, if you stick to meaningful and actionable metrics that map to your top-level goals, you’ll always move your sales team in the right direction.

Originally posted on the Salesforce Blog.

Enrique Ortegon

SVP of SMB Sales North America, Salesforce