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Key Sales Metrics and Their Impact

7 min read

From: alexhormozi

This article outlines crucial sales metrics, common problems encountered in sales processes, and effective strategies implemented to significantly improve a business’s sales performance within 60 days [00:00:01].

Understanding Key Sales Metrics

To understand sales performance, several metrics are vital for analysis:

  • Show Rate: The percentage of people who show up for their scheduled appointment [00:00:22]. For example, if 70 out of 100 people with appointments show up, that’s a 70% show rate [00:00:37]. This metric indicates the quality of lead flow [00:01:09].
  • Offer Rate: The percentage of people who show up for an appointment to whom an offer is actually made [00:00:47]. Not everyone is qualified for an offer, even if they attend [00:00:51]. A 100% offer rate signifies high-quality lead flow [00:01:05].
  • Close Rate: The percentage of people who agree to purchase [00:01:13]. This can be tracked based on people who show up or people who are offered [00:01:16]. Tracking both helps prevent salespeople from artificially inflating their close rates by only offering to highly qualified leads, which would show a low offer rate [00:01:27]. High-quality data helps identify if problems stem from low-quality leads or salesperson performance [00:01:50].
  • Percentage of Cash Collected Upfront: The amount of cash collected at the point of sale relative to the total sale price [00:02:02]. This metric indicates the buyer’s conviction in the solution [00:23:35].
  • Units Sold: The total number of products or services sold, representing the overall output of the other four metrics [00:02:33].

Initial Business Challenges (Before)

A business, a portfolio company, faced significant issues resulting in low sales. The baseline data for the prior month showed:

This indicated multiple areas for improvement to increase daily revenue goals [00:03:32].

Problem 1: Low Show Rate

A show rate of 49% was significantly below the benchmark of 70% for appointment-based businesses [00:03:40]. This represented a 40% difference, highlighting a major constraint [00:04:20]. Factors affecting show rate included:

  • Targeting and Offer: The marketing was incorrectly targeting 18-24 year olds instead of the ideal 25-35 year olds who were gainfully employed [00:05:07].
  • Ad Objective Misalignment: The media buyer optimized for lowest cost leads and appointments, rather than optimizing for cost per sale, leading to low-quality prospects [00:05:31].
  • Inefficient Sales Operations: Sales staff spent considerable time cancelling unqualified appointments (up to 75% before the 49% show rate) [00:05:44].
  • Multitasking by Setters: The setting team was responsible for both calling leads to set appointments and nurturing/following up to ensure attendance, leading to inefficiencies [00:06:04].
    • No double dialing [00:06:28].
    • Slow time to contact leads [00:06:38].
    • Lack of proper appointment setting times and morning-of nurture (reminders) [00:06:53].

Problem 2: Low Close Rate

The close rate of 27% was deemed too low for a “mid-priced consumer service” with a two-call close process, with a target benchmark of 40% [00:07:42]. This represented a 50% improvement opportunity [00:07:58].

  • Surface-Level Discovery: Sales conversations lacked depth, focusing on obvious questions rather than understanding the prospect’s underlying intentions and motivations (the “why”) [00:08:10].

    The speaker uses an iceberg analogy: “If you think about sales process what they were doing is they were asking questions that were here surfice level but this is where all the meat is and that’s where all the money is is the questions that are below the surface is understanding why someone’s even doing this to begin with” [00:09:27].

  • High Objections/Obstacles: Salespeople frequently encountered resistance due to insufficient discovery and an inability to address concerns early [00:09:42]. Common objections included “too much,” “need to think about it,” or “talk to spouse,” often serving as “smoke screens” [00:10:19].
  • Poor Tonality and Delivery: Salespeople were “talking at people and not listening” [00:11:01]. Even with the right script, improper tone, emphasis, or lack of “childlike curiosity” could alienate prospects [00:11:20].

    “I didn’t say he hit his wife” [00:11:52] I didn’t say he hit his wife (Someone else said it) [00:11:55] I didn’t say he hit his wife (I didn’t use those words) [00:11:58] I didn’t say he hit his wife (Someone else hit her) [00:12:02] I didn’t say he hit his wife (He did something else to her) [00:12:06] I didn’t say he hit his wife (He hit someone else’s wife) [00:12:09] I didn’t say he hit his wife (He hit his kid) [00:12:12]

Problem 3: People and Organizational Structure Issues

Organizational structure problems severely impacted the sales team’s effectiveness:

  • CEO as Sales Manager: The CEO, despite being the best closer, was not an effective sales manager, leading to high sales team churn [00:12:40]. Promoting the best closer to manager is a common mistake as closing and managing require different skills [00:12:55].
  • Under-Educating on Prospect: The company focused too much on product education and not enough on understanding the prospect, which is crucial for effective selling [00:13:25].
  • Low Setting Team Expectations: The setting team had low performance expectations (setting 2 appointments/day), while the benchmark was 3 [00:14:20].

Solutions Implemented

The interventions focused on addressing the root causes, prioritizing personnel and structure first.

Solution 1: Hired a Sales Director

  • Strategic Priority: Hiring an experienced sales director was the first critical step, as the CEO’s micromanagement and lack of managerial skill hindered overall progress [00:15:11]. This highlights the “who” over the “what” or “how” in solving recurring problems [00:15:42].
  • Expertise in Hiring: The hiring process involved assessing culture fit and conducting tactical interviews with subject matter experts to evaluate experience and knowledge in metrics and solution execution [00:16:18].

Solution 2: Fixed Ad Targeting

  • Personnel Change: A new media buyer was hired after identifying negligence and incorrect optimization by the previous one [00:17:18].
  • Optimization Shift: Ad campaigns were redirected to target 25-35 year olds who loved their jobs, aligning with the ideal customer profile [00:17:39].

Solution 3: Reduced Sales Team and Reset Expectations

  • Sales Team Optimization: The sales team was downsized based on sales team utilization (e.g., salespeople taking 4 calls/day instead of 10), allowing for the removal of low performers and rewarding high performers [00:17:42].
  • Increased Productivity: Fewer but better-performing people led to increased sales and a refreshed team culture [00:18:37].
  • Setting Team Standards: Expectations for the setting team were raised from 2 to 4 sets per day, a 100% increase [00:18:51].

Solution 4: Promoted Lead Nurture Specialist

  • Role Specialization: One setter was promoted to a dedicated lead nurture specialist role to handle follow-ups and appointment reminders, eliminating multitasking [00:19:01].
  • Nurture Checklist: The specialist was equipped with a checklist of proven methods to increase show rates, including:
    • Three-way Introductions: Connecting the setter, prospect, and closer via phone to build trust [00:19:30].
    • Personalized Morning-of Reminders: Closers sending personalized voice memos or video texts to prospects [00:19:50].

Solution 5: Optimized Sales Scripts

  • Deeper Discovery: The sales script was revised to include deeper, more meaningful questions, focusing on the prospect’s intentions and underlying problems [00:20:10].
  • Proactive Objection Handling: The script incorporated bringing potential objections (or “zombies”) to the front, addressing them before they derail the close [00:20:18]. An example includes asking if other decision-makers are required for the call and rescheduling if necessary [00:20:39].
  • Looping for Closing: The team was drilled on “looping,” a technique for handling objections by resolving the concern and then asking for the sale again, repeatedly [00:20:59]. This directly addresses the fear of asking for the sale multiple times [00:21:16].

Results After 60 Days

After implementing these targeted changes over two months, the business saw significant improvements across all key metrics:

  • Show Rate: Increased from 49% to 70%, a 40% improvement [00:22:45].
  • Offer Rate: Maintained at 80%, indicating that the improved targeting brought in more qualified leads whom it was appropriate to offer [00:22:58].
  • Close Rate: Increased from 27% to 41%, a 50% improvement and exceeding the benchmark [00:23:12].
  • Cash Collected Upfront: Rose from 47% to 82%, nearly doubling the amount of upfront cash collected [00:23:44].
  • Units Sold: Monthly sales increased from 56 to 93 units [00:24:16].

These improvements led to a substantial increase in the business’s cash flow (4x) and overall sales performance [00:24:06].

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