"Which metrics I should focus on?" is a recurring question from consultants who are looking to increase their top line.
I'll be direct. There are plenty of good sales metrics that you can and should use. But based on my experience, the best KPI to inform and predict success in increasing revenue is the number of new qualified opportunities.
Companies use different definitions, and the marketing world is full of jargons MQL, SQL, PQL. You don't need any of this.
Here's how I define a qualified opportunity:
- You've had a first call with the prospect;
- After that first chat, the opportunity is still open;
- You can add an accurate forecast to the size of the opportunity (revenue);
- Historically, opportunities from that stage see a win rate of at least 10%.
Opportunities must meet all of these criteria to be considered “qualified”.
Here are 3 reasons why your consultancy firm should adopt it as well:
- It's a reliable lead indicator;
- It shows you have mastered the basics;
- It's insurance against poor processes or lack of sales skills.
Reliable Lead Indicator
The main point of tracking specific metrics is to measure your progress toward specific goals. Lagging indicators show the results of your efforts, but take a long time to change. Leading indicators, on the other hand, measure the activities you are implementing and can be tracked much faster.
Examples of leading indicators for sales are Pipeline Volume, Number of Calls or Meetings per month, or Number of New Inbound Leads. As for lagging indicators, the most used ones are Sales Revenue, Retention Rate (if you work on a retainer), and Average Sales Cycle.
You should use both but always prioritize lead indicators. If you have a goal of closing 10 new projects but your sales cycle is six months, you can't afford to wait all this time to see if you’re on track to meet your objective.
The number of new qualified opportunities is an excellent leading metric because it directly affects the whole pipeline and improvements are felt immediately.
Nothing happens until there is a conversation that results in an opportunity:
- You need a qualified opportunity to explore how you can help a prospect;
- You need discovery if you want to suggest alternatives and send a proposal;
- You need to send more proposals if you want to win more projects.
A full and healthy pipeline depends first on opportunities being moved into it.
It Shows You Have Mastered The Basics
In the movies and among less experienced salespeople, you can find "ABC" being repeated like a mantra - always be closing. The idea is that you should always be asking for commitments and take an aggressive approach to move the deal forward. This is poor advice and completely ineffective today.
The biggest challenge isn’t closing. The biggest challenge is opening:
- Prospects are busier than ever, trying to produce more results, with fewer resources, faster. They understand time is their most valuable asset.
- Traditional competitors and an avalanche of new independent consultants are entering the market and approaching your dream clients. Since most of them are not professional and have made your prospects feel like they wasted their time, it becomes even harder to start an initial conversation.
That's another reason why the number of qualified opportunities is a great metric. Because it shows you are doing at least some of these very important things right:
- You know (or have a very good idea of) who your ideal prospects are;
- You have a good marketing strategy in place - you know where you can find and approach them prospects, how to build awareness and interest, and the best ways to trade enough value for their time;
- You know how to lead the first call (see definition of a "qualified" opportunity).
These are not easy but are all necessary skills you need to have an effective sales and marketing engine. Adopting the metric will allow you to focus on systematically improving them.
Insurances You Against Poor Processes Or Skills
Whenever I hear a consultant or boutique firm say they need help to close more projects, it's rarely true. Once we give a quick look at their pipeline, it becomes clear that they would miss their revenue goals even if they close every qualified opportunity.
But the opposite can also be true. We all know someone who has zero communication skills, no empathy, and is super shy - and still wins projects. How? He has so many opportunities, it's almost impossible for him not to close one.
Many consultants ask me how they can "get good" at sales. What I tell them is this: Sales is not one single activity, but a collection of many different skills that can be practiced and developed over time. You develop them through your experiences - talking to prospects and promoting your services - but also through training.
Of course, it can be hard and time-consuming to learn everything by doing. With professional support, you can accelerate the learning curve by gradually identifying and improving the weaker parts of your sales process. But having more opportunities than you can handle makes everything easier.
Start tracking your number of qualified opportunities, and work on increasing it. Your top line will follow.